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bigduckontax, Accountant
Category: Tax
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BigDuckOnTax! I have a few issues regarding VAT and becoming

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HeyCustomerI have a few issues regarding VAT and becoming VAT registered. I have posted a question on my account but you seem like you know your stuff. Im new to this website and not sure if im allowed to reach out like this.Best Regards

Hello Luke, what is your difficulty?

Customer: replied 1 year ago.
Hey, I run an online store selling rubik cubes and different variants of them ( My issue is that in the past 12 months we have grown exponentially. We are currently on the flat rate scheme of 7.5% (other retail i believe it is).We are about to break the 200k mark in the 12-month rolling period and will soon have to come off of the flat rate scheme (I believe the limit is 230k?)Our issue is that we actually spend very little on VAT as we import from China/HongKong and we host our website using Shopify (who are based in Canada and charge no VAT on their monthly fees). All we really purchase is tape and brown mailing boxes and packing peanuts to secure the items in the order (as you know, postage does not have VAT so nothing to reclaim/offset there).We are in a very competitive market and if we up our prices by 20% we will not have any customers as our market is just saturated with younger kids starting stores and trying their luck online.We dont have high-profit products and cannot afford to take the 20% VAT out of profits as we will be bankrupt in our first or second quater.Is there a better VAT scheme to go on? Or can the flat rate be extended or is there exceptions etc...? Or is there a workaround at all somehow?Best Regards

Have you considered holding your turnover to just under the threshold?

Customer: replied 1 year ago.
Im not to sure how we could do that really. We are one of the largest toy shops of this kind in the UK and have tried super hard to grow it to this level but scaling is a huge issue. Is it an option to just 'stop trading' for a month etc...? I think customers may then also flee to our competitors.

Yes, that is always a danger. If you can keep your turnover below 150K in any 12 month period you couls consider the Flat Rate Acheme. You say you have little input tax to reclaim so that would be no difficulty.

Customer: replied 1 year ago.
i don't somehow think we can do that without just shutting the website off for 2/3 months of the year and would probably be a larger issue.Im assuming we have run out of other options and other VAT schemes?

I have already suggested the Flat Rate Scheme and fear we are running out of options.

Customer: replied 1 year ago.
We are currently on the FlatRate Scheme but obviously wanting to grow as a store and not limit our sales. I was hoping there was a different scheme just above Flat Rate but below the standard 20% scheme I think haha!

Sorry, no. You could start another company completely separated from the first activity and operate that below the turnover threshold.

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