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taxadvisor.uk
taxadvisor.uk, Chartered Certified Accountant
Category: Tax
Satisfied Customers: 4996
Experience:  FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
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I am starting a business and am vat registered,however

Resolved Question:

Hi
I am starting a business and am vat registered,however im confused ,my suppliers charge me [email protected]% then i sell my goods,i know i claim back the 20% from my supplier total but then do i pay vat on the profit i have made
example buy of a supplier for £100 inc vat sell for £150 do i then pay vat on the £40?
Submitted: 1 year ago.
Category: Tax
Expert:  taxadvisor.uk replied 1 year ago.
Thank you for your question.. If you are VAT Registered, you charge VAT on your taxable supplies. You reclaim against it VAT paid on your purchases and business expenses. When you prepare your VAT return you pay the difference between VAT collected and VAT paid to HMRC VAT Office.You should account for your sales and purchases ex VAT and VAT is posted to a VAT control account within the balance sheet. You would tax on the profit made and not VAT on profit made. This is best explained in an example here 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.
Expert:  taxadvisor.uk replied 1 year ago.
You would tax on the profit made and not VAT on profit made.Should readYou would pay tax on the profit made and not VAT on profit made. Apologies for inadvertent error.
Customer: replied 1 year ago.

Hi

im sorry but im really consfused as I recently filed my vat return and owed alot of vat to hmrc.

the question i gave was i correct in my answer?

Expert:  taxadvisor.uk replied 1 year ago.

Thank you for your reply

Please advise where you are confused and I will try to help you.
I am a qualified accountant in practice and the example I gave you is how you should account for VAT on your VAT returns.

You are not correct to say you pay VAT on profit. You pay the difference between your VAT outputs and VATinputs to VAT office.

Many thanks

Customer: replied 1 year ago.

so on my original exapmple how much vat would i repay?

Expert:  taxadvisor.uk replied 1 year ago.
Thank you for your reply.Going back to your original example"example buy of a supplier for £100 inc vat sell for £150 do i then pay vat on the £40?"Assuming your selling price is inclusive of VAT thenSales ex VAT = £125VAT output = £25 (20% of 125)Total invoice value (125+25) £150 PurchasesPurchases ex VAT = £83.33VAT input = £16.67 (20% of 83.33)Total invoice value (83.33+16.67) £100VAT payable to HMRC (25.00-16.67) £8.33 If your sale price is £150 ex VAT thenSales ex VAT = £150VAT output = £30 (20% of 150)Total invoice value (150+30) £180VAT payable to HMRC (30.00-16.67) £13.33 I hope this is helpful
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