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Hello, I am Keith, one of the experts on Just Answer, and pleased to ba able to help you with your question.
Your company's turnover is getting dangerously close to the 83K VAT threshold. This turnover is calculated from an aggregate of standard, reduced or zero rated supplies. Your Chinese exports will, of course, be zero rated ones. You will have to look very seriously at the need to register for VAT almost immediately and, if the bid for the 1.8M contract is successful, then registration will be inevitable.
Adding a low margin would, I suggest, be a prudent move for your company. 5% does not give much rattle room, however. It might be safer to set up a separate company to handle this contract as any hiccup could bring the whole kit and caboodle falling down about your ears.
I do hope I have been of assistance. If you wish to follow up feel free if you think I have failed to cover a point.
Be careful, the threshold for VAT includes zero rated supplies. From the tenor of your question your company is dangerously close to that turnover level.
1 & 2. Your company will be liable to Corporation Tax (CT) on its profits. The rate is currently 20%, but the Chancellor has recently announced a forthcoming reduction to 15%.
3. Yes it will for the services rendered, but as an export it is a zero rated supply.
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