Being an entrepreneur...... basic money problems...

[tegwin]

Can anyone give me some advice about the situation I may well be in.

I am just a normal person, not a company etc...


I have created a product...lets call it a Dilbert...The Dilbert is manufactured by two different companies on my behalf.


When I pay these companies for the Dilbert parts I obviously pay them VAT.





When I come to sell this product I just sell them for X amount....This obviously passes on the VAT that I have paid. (I assume?)...



But, if I want to sell these items to an educational establishment, they do not have to pay VAT. So where does that leave me?...


Basically, I just want to be able to sell the Dilberts... I dont know how many I will be able to sell, so its not worth starting up a "company"....Obviously the less paperwork I have to complete the better!

Can anoyne suggest what to do...Just need to be legal and make the most proffit possible...(obviously)

[Mc Lovin]

catch 22 mate, either become vat reg or up the price of your product.

[humpbackmaniac]

You claim the VAT back. Easy. Ask the Tax man, bring tea and biscuits get the bd on your side from the outset and they can be quite helpful.

Good Luck with the Dilbert!

[trumpet600]

Won't the kiddies parents have something to say about Dilbert's at such a young age?

[esselte]

humpbackmaniac said:

You claim the VAT back. Easy. Ask the Tax man, bring tea and biscuits get the bd on your side from the outset and they can be quite helpful.

Good Luck with the Dilbert!

If you're not trading as a comapny how do you claim the VAT back?

[siscar]

You charge VAT on everything you sell (assuming the item itself isn't something that is exempt). You pay VAT on everything you buy. You then pay HMRC the difference between the VAT you have charged people and the VAT you have paid to people.

The status of the people you sell to makes no difference, their status determines whether they can reclaim the VAT on purchases it doesn't determine whether you charge them VAT (assuming that they are in the UK).

[turbobloke]

OP - you say: if I want to sell these items to an educational establishment, they do not have to pay VAT. So where does that leave me?

One of my companies sells services to schools, we charge VAT, they pay VAT.

Some can then claim it back, some can't, depending on their category (status) iirc, but that's not really your concern except for pricing strategy perhaps.

ETA: Are you VAT registered? If not then you don't charge VAT at all, but you have to pay VAT to VAT registered suppliers (and can't then claim it back). If you are VAT registered you can claim back the VAT when you complete your VAT return each quarter.

Edited by turbobloke on Thursday 9th October 13:55

[Tuna]

I think the point of the OP is that he is not a company - not VAT registered.

[AlexB]

My understanding is that, unless you are VAT registered (by choice, or, I believe compulsory, if you have a turnover above the threshold - something like £60k pa), you do not charge your customers VAT and cannot claim VAT back from HMRC. So the schools would pay the same non-VAT price as anyone else.

If you are VAT registered then you would charge customers VAT for the Dilbert and they will claim it back, or not, depending upon their status.

It's probably best to speak to an accountant to make sure you comply with the various tax regs as you don't want to upset the tax man if at all possible!

Good Luck
Alex

Edited by AlexB on Thursday 9th October 13:51

[esselte]

siscar said:

You charge VAT on everything you sell (assuming the item itself isn't something that is exempt). You pay VAT on everything you buy. You then pay HMRC the difference between the VAT you have charged people and the VAT you have paid to people.

The status of the people you sell to makes no difference, their status determines whether they can reclaim the VAT on purchases it doesn't determine whether you charge them VAT (assuming that they are in the UK).

If you're not a company how do you this without a VAT number?

[tegwin]

I had not realise that turbobloke...I just had this bizzare notion that all schools did not pay VAT on products and services...but yes, I guess they can claim the VAT back..

But presumably they will have had to have bought a product from a VAT registered company so they have something to claim back against?

[turbobloke]

Tuna said:

I think the point of the OP is that he is not a company - not VAT registered.

OK, then there is no VAT to charge to customers and the VAT paid to suppliers (which cannot be claimed back) needs to be taken into account when pricing a Dilbert in order to give an acceptable profit but at a price that will still sell Dilberts to schools. Hopefully

[MikeyT]

Just set up as a sole trader and register for VAT - you can register under the threshold - and that sorts all your probs out - you charge it - you claim it back - easy. One return every three months - simple.

[turbobloke]

tegwin said:

I had not realise that turbobloke...I just had this bizzare notion that all schools did not pay VAT on products and services...but yes, I guess they can claim the VAT back..

But presumably they will have had to have bought a product from a VAT registered company so they have something to claim back against?

Yes - if your Dilbert is sold from a non-VAT-registered enterprise there is no VAT on the invoice schools get from you, and nothing for them to pay (or to claim back, therefore). So you need to set a price for your Dilberts that schools will pay which also gives you an acceptable profit taking your total costs into account...right?!

Depending on your turnover and customer / supplier base it may be worth voluntary registration as suggested by MikeyT but it sounds like you need an accountant to advise there.

[LadyHayles]

Pretty sure that you can register for VAT as a sole trader not just as a limited company.

Would suggest you read up on registering/dealing with VAT on the following:-

www.hmrc.gov.uk

[The Excession]

turbobloke is spot on.

If you are not VAT registered how can you put your VAT number on a receipt or invoice? You cannot charge VAT, you just add to the overall selling cost of product according to your manufaturing costs (which include the VAT you paid to suppliers)

In all honesty you are better staying out of the VAT system for as long as possible since you incure the costs of all the extra paperwork and accountants.

[tegwin]

Urgh...how complicated...is this designed to put people off!!!


Thanks for your input...think I have some reading to do!

[MikeyT]

The Excession said:

turbobloke is spot on.

If you are not VAT registered how can you put your VAT number on a receipt or invoice? You cannot charge VAT, you just add to the overall selling cost of product according to your manufaturing costs (which include the VAT you paid to suppliers)

In all honesty you are better staying out of the VAT system for as long as possible since you incure the costs of all the extra paperwork and accountants.

If you're not registered you won't HAVE a number ...

I think the other way I'm afraid - if you incur VAT a lot in the manufacturing process, I'd register - then you're fine and can claim it back and charge it.

Works much better of course if the companies buying the dilberts are almost always VAT registerd - ie sizeable firms/companies.

If you're looking at a decent turnover one day you'll have to be registered in any case ...


And the paperwork is neglible for a sole trader really - I did VAT returns every quarter for 12 years - couple of hours really.

[rumpelstiltskin]

tegwin said:

Can anyone give me some advice about the situation I may well be in.

I am just a normal person, not a company etc...


I have created a product...lets call it a Dilbert...The Dilbert is manufactured by two different companies on my behalf.


When I pay these companies for the Dilbert parts I obviously pay them VAT.
Don't let him fool you folks,my gay friend has a Dilbert.Don't know why you have to kid around with the name?.It's a great product!Dildo for a woman,Dilbert for a man!



When I come to sell this product I just sell them for X amount....This obviously passes on the VAT that I have paid. (I assume?)...



But, if I want to sell these items to an educational establishment, they do not have to pay VAT. So where does that leave me?...


Basically, I just want to be able to sell the Dilberts... I dont know how many I will be able to sell, so its not worth starting up a "company"....Obviously the less paperwork I have to complete the better!

Can anoyne suggest what to do...Just need to be legal and make the most proffit possible...(obviously)

[JustinP1]

tegwin said:

Urgh...how complicated...is this designed to put people off!!!


Thanks for your input...think I have some reading to do!

It's easy.

Option 1: Don't register, you have to pay VAT and you can't charge VAT.

Option 2: Register for VAT. You can claim back VAT paid, you charge VAT, and the business you sell to claims it back. If they can...

Whether they can or not depends on whether they have taken option 1) or 2)!