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TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15979
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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If i am a sole trader with a turnover of £200 000, how much

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If i am a sole trader with a turnover of £200 000, how much VAT am I liable for?

If my expenses before all tax are approx £100 000, is my tax calculation 'turnover-VAT-expenses' or is it 'turnover-expenses', ignoring the impact of VAT?

Can you tell me what business you are in please.
Customer: replied 3 years ago.
i run a martial arts club and am thinking of expanding so that I run multiple centres. At the moment i am just below the VAT threshold but, if I expand and things go according to plan, then the figures are as I described. I am worried that I will lose almost all the extra income earned through expansion to VAT and Income Tax!

Leave this with me while I draft my answer. It will take a little while.
Customer: replied 3 years ago.
thank you, XXXXX XXXXX!

Hi again.

You can read the basics on VAT here. In net terms, a business registered for the standard VAT system actually pays no VAT. You are simply an unpaid tax collector for HMRC. If all your turnover is VATable at 20%, you will charge your customers £40,000 in VAT (£200,000 x 20%). You will offset against that any VAT added to your expenditure by your suppliers for equipment etc. If the VAT you charge exceeds the VAT you pay, then you pay over the net amount to HMRC. If the VAT you pay exceeds the VAT you charge, you will receive a VAT repayment which is not taxable income.

As a sole trader, you will complete a self-assessment tax return. If you are registered for the standard VAT system (as opposed to the flat rate system which you cannot register for if your turnover is more than £150,000 per annum, see here), you exclude the VAT you charge your customers from your turnover and the VAT you pay your suppliers from your expenses. So, your profit or loss will be turnover less expenses. VAT doesn't come into it as in net terms your business pays no VAT. Your customers pay the VAT.

You should take a look at VAT Notice 701/45 (August 2011) here and seek out more detailed advice from your accountant or tax adviser as to the VAT implications for the type of service(s) you supply. Some sports services are exempt from VAT but paragraph 4.1 suggests that exemption only applies to non-profit making organisations. As you will see here, your type of business is in a niche area and I can only give you some pointers from a distance.

I hope this helps but let me know if you have any further questions. I have to go out for a while but will be back in about 90 minutes.

Customer: replied 3 years ago.
I don't think I can pass on a VAT charge to my customers. That might put many of them off. What would my position be if I don't pass a VAT charge to my customers?

If you currently charge £100, then after you register for VAT, you will charge £83.33 plus £16.67 VAT if you don't want to pass on the VAT to your clients. In effect, you will be paying the VAT yourself. That's a difficulty many businesses face I'm afraid.


You might see an advert occasionally on TV from a car dealer offering VAT free cars for the weekend. They aren't VAT free at all. The dealer is effectively paying the VAT but it still shows up on the invoice he gives to the customer.

TonyTax and other Tax Specialists are ready to help you

Thanks for accepting my answer and good luck with your plans.