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taxadvisor.uk
taxadvisor.uk, Chartered Certified Accountant
Category: Tax
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Experience:  FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
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I'm just starting out, I have a website selling ironmongery,

Resolved Question:

I'm just starting out, I have a website selling ironmongery, I buy the items plus VAT, do I then sell the item with the VAT even though I don't earn enough to pay VAT?
Submitted: 2 years ago.
Category: Tax
Expert:  taxadvisor.uk replied 2 years ago.
and welcome to the site. Thank you question.

You can only charge VAT on your sales price if you are VAT registered.
Otherwise, you have to absorb the VAT paid on your purchases within your margin.

Example - not VAT registered
Buying price £100+VAT = £120
Say selling price is £150
Your gross margin becomes (150-120) = £30

Example - VAT registered
Buying price £100+VAT = £120
Say selling price £150 inclusive of VAT
VAT on sales (150*100/120) = £25

Your VAT payable to HMRC becomes (25-20) = £5
Your gross margin becomes (125-100) = £25

If you were able to sell it for £150+VAT
Your VAT payable to HMRC becomes (30-20) = £10
Your gross margin becomes (150-100) = £50

Based on above, you may wish to consider voluntary VAT registration and this way you could reclaim VAT on your business expenses as well.

I hope this is helpful and answers your question.

If you have any other questions, please ask me before you rate my service – I’ll be happy to respond.

taxadvisor.uk and other Tax Specialists are ready to help you
Expert:  taxadvisor.uk replied 2 years ago.

Geraint

I notice you have viewed my answer to your question about VAT on sales (JACUSTOMER-b0bmjtqt- Last Viewed on 24/01/2015 at 15:35).

Just checking to see if you have any issues relating to your question that I may not have addressed.


Please let me know if I can be of further assistance.

Expert:  taxadvisor.uk replied 2 years ago.

I thank you my answer.

Best wishes