VAT - **** 'em
Discussion
RicksAlfas said:
When I print a book, all the raw materials have VAT on them, which I claim back.
When I sell the book to the end user it is zero VAT rated...
/\When I sell the book to the end user it is zero VAT rated...
As a (now retired) photographer I used to supply photographs for books.
The film manufacturers would purchase the materials, pay VAT on them and then reclaim it.
The film manufacturers would sell the film to the wholesalers who would pay the VAT and then reclaim it.
The wholesalers would sell the film to the retailer who would pay the VAT and then reclaim it.
I would buy the film from the retailer, pay the VAT and then reclaim it.
I would pay the lab to process the film and reclaim their VAT charge.
I would then submit a VAT invoice the publishers for my work, and they would then reclaim it.
So far - no tax gain for HMRC.
And as Rick says, the books were then sold as zero rated items and so although an awful lot VAT has been
charged and reclaimed with no end user paying any VAT
snuffy said:
My business is 100% B2B.
a) I add on VAT, and submit my invoice.
b) Customer gives me the VAT.
c) I give that VAT to HMRC
d) Customer claims back that VAT from HMRC
e) HMRC gives the VAT I gave to them, from my customer, back to my customer.
How brilliant is that ?
But between b-c you have 20% extra cash, for up to ~4 months (depending upon actual timing of payments). To most small businesses, that's very valuable. It's almost like the government giving you an interest-free loan of ~20% of revenue for a few months, to help small B2B businesses?a) I add on VAT, and submit my invoice.
b) Customer gives me the VAT.
c) I give that VAT to HMRC
d) Customer claims back that VAT from HMRC
e) HMRC gives the VAT I gave to them, from my customer, back to my customer.
How brilliant is that ?
Pistom said:
I get the argument that it levels the playing field but in some sectors, the impact on prices for non VAT registered customers would be huge.
One of my businesses is a furnished holiday let where non of the customers can claim VAT back but many suppliers of holiday lets are under the threshold.
If the registration limit was reduced and the government considered that it was beneficial to have a lower rate of tax on UK holiday accommodation let by small businesses then they could simply lower the rate charged.One of my businesses is a furnished holiday let where non of the customers can claim VAT back but many suppliers of holiday lets are under the threshold.
At the moment the fact that VAT isn’t charged on this business activity is accidental rather than a deliberate decision by government, and choosing what is taxed and by how much seems a more sensible approach.
bad company said:
When we had some work done at our offices the electrician had all the materials invoiced direct to my company. We paid the invoice and legally reclaimed the VAT. He then charged separately for his labour, that’s how he kept under the threshold.
There must be other similar legal ruses?
Supply splitting has been going on since VAT was introduced with HMRC keeping a close eye on it and challenging it when they consider it goes too far.There must be other similar legal ruses?
In your case the issue with splitting the goods from the installation is that if there is a problem with the installed goods then you have two different suppliers who can point the finger at each other and say “their fault” rather than a single supplier of installed goods.
And doing as you did, did not benefit you in any way at all since if the electrician had been VAT registered you would have simply claimed back the VAT!
PF62 said:
Supply splitting has been going on since VAT was introduced with HMRC keeping a close eye on it and challenging it when they consider it goes too far.
In your case the issue with splitting the goods from the installation is that if there is a problem with the installed goods then you have two different suppliers who can point the finger at each other and say “their fault” rather than a single supplier of installed goods.
And doing as you did, did not benefit you in any way at all since if the electrician had been VAT registered you would have simply claimed back the VAT!
Actually it benefited me considerably. The same electrician worked at my home. In your case the issue with splitting the goods from the installation is that if there is a problem with the installed goods then you have two different suppliers who can point the finger at each other and say “their fault” rather than a single supplier of installed goods.
And doing as you did, did not benefit you in any way at all since if the electrician had been VAT registered you would have simply claimed back the VAT!
Its a bit of an inaccuracy to say your price to non vat customers needs to go up 20 percent to make the same profit. The other side of the coin is you instantly get a 20 percent discount on everything you buy for the business, diesel , leccy, tools materials, entertaining potential customers, food while traveling, uniform by the time you are done you can keep the same profit but only put your prices up by 20 of your overall profit, minus the one or 2 things you cant claim vat back on. The quarterly paperwork is a f
king headache but iy makes your end of year a piece of piss to generate.
Fair would be vat for everyone .
All the far eastern sellers on amazon that supply a vat invoice must be up to something i reckon.
king headache but iy makes your end of year a piece of piss to generate.Fair would be vat for everyone .
All the far eastern sellers on amazon that supply a vat invoice must be up to something i reckon.
PF62 said:
OldGermanHeaps said:
All the far eastern sellers on amazon that supply a vat invoice must be up to something i reckon.
Yes. They just don’t pay HMRC. What are HMRC going to do? Send the debt collectors to Shenzen.Silverage said:
PF62 said:
OldGermanHeaps said:
All the far eastern sellers on amazon that supply a vat invoice must be up to something i reckon.
Yes. They just don’t pay HMRC. What are HMRC going to do? Send the debt collectors to Shenzen.The rules mean that the online platform such as Amazon are liable if they have not checked that the supplier is VAT registered.
The Chinese suppliers are registered for VAT so Amazon isn't liable - Amazon simply won't let you sell if you are not VAT registered - and then if the Chinese suppliers don't pay their VAT (or even never submit any VAT returns) then HMRC will deregister the Chinese supplier and Amazon will remove them from their marketplace.
All of which means Amazon are not liable for the VAT the Chinese supplier owes.
Meanwhile the Chinese supplier registers for VAT with a new name and the whole saga continues.
Elderly said:
RicksAlfas said:
When I print a book, all the raw materials have VAT on them, which I claim back.
When I sell the book to the end user it is zero VAT rated...
/\When I sell the book to the end user it is zero VAT rated...
As a (now retired) photographer I used to supply photographs for books.
The film manufacturers would purchase the materials, pay VAT on them and then reclaim it.
The film manufacturers would sell the film to the wholesalers who would pay the VAT and then reclaim it.
The wholesalers would sell the film to the retailer who would pay the VAT and then reclaim it.
I would buy the film from the retailer, pay the VAT and then reclaim it.
I would pay the lab to process the film and reclaim their VAT charge.
I would then submit a VAT invoice the publishers for my work, and they would then reclaim it.
So far - no tax gain for HMRC.
And as Rick says, the books were then sold as zero rated items and so although an awful lot VAT has been
charged and reclaimed with no end user paying any VAT
Ultimately the supply chain sells its overall value created to an end-user that can't reclaim the VAT and the prior deductions mean that tax taken accurately reflects the value created in the whole process. Remove the supply chain transactions and the tax only gets paid right at the end and you can imagine how much accountants would complain about having to work out the overall value that had been created at that point! It would be impossible to tax value creation in a way that wasn't completely wide open to shenanigans.
If the ultimate supply attracts no VAT, then the netting off in the supply chain means they haven't paid any VAT at all. Quite neat really.
The dance people registering for VAT, most likely the reason is that it's a service being provided by a company for profit. If you find a non-profit dance club where there is no distribution of profit, then it is likely an exempt activity.
biggiles said:
snuffy said:
My business is 100% B2B.
a) I add on VAT, and submit my invoice.
b) Customer gives me the VAT.
c) I give that VAT to HMRC
d) Customer claims back that VAT from HMRC
e) HMRC gives the VAT I gave to them, from my customer, back to my customer.
How brilliant is that ?
But between b-c you have 20% extra cash, for up to ~4 months (depending upon actual timing of payments). To most small businesses, that's very valuable. It's almost like the government giving you an interest-free loan of ~20% of revenue for a few months, to help small B2B businesses?a) I add on VAT, and submit my invoice.
b) Customer gives me the VAT.
c) I give that VAT to HMRC
d) Customer claims back that VAT from HMRC
e) HMRC gives the VAT I gave to them, from my customer, back to my customer.
How brilliant is that ?
I always treat VAT as not being my money (which it's not), so the absolute minimum amount of money in my bank account would be VAT that is due.
The idea of business is to make money. Deliberately keeping your business small to stay under the vat threshold is a ridiculous race to the bottom strategy. If you don’t grow you will die.
Just as people who fear earning more because they’ll be a top rate taxpayer, if you fear grow that comes with extra complication like a VAT registration, you’ll end up being lost in the doldrums anyway.
Just as people who fear earning more because they’ll be a top rate taxpayer, if you fear grow that comes with extra complication like a VAT registration, you’ll end up being lost in the doldrums anyway.
snuffy said:
You sometimes see stories in the news about small businesses complaining about how they have a VAT bill to pay and they don't have the money. I do wonder if the reason for that is because they have spent the VAT they have been paid, so they don't have it when their VAT bill due ?
Depends on the small business and their customers.A retail business getting paid when they hand the goods over - then yes they have spent the VAT they took from the customer on something else.
Other types of businesses with different types of customer that might not be the case - although if they are on the cash accounting scheme then again they will have spent the VAT.
Hence why HMRC will take some consideration of circumstances when a VAT bill hasn't been paid, but that does include just killing the business if they think the debt is just going to get worse.
There is also the potential short term windfall of pre-registration VAT that allows businesses to reclaim VAT on fixed assets and unsold stock purchased in the 4 years prior to registration and services purchased in the 6 months prior to registration. This plus the ability to reclaim VAT on inputs means that prices do not need to shoot up by 20% at all.
Rebew said:
There is also the potential short term windfall of pre-registration VAT that allows businesses to reclaim VAT on fixed assets and unsold stock purchased in the 4 years prior to registration and services purchased in the 6 months prior to registration. This plus the ability to reclaim VAT on inputs means that prices do not need to shoot up by 20% at all.
Wish my accountant told me about pre registration PF62 said:
No that isn't the case.
The rules mean that the online platform such as Amazon are liable if they have not checked that the supplier is VAT registered.
The Chinese suppliers are registered for VAT so Amazon isn't liable - Amazon simply won't let you sell if you are not VAT registered - and then if the Chinese suppliers don't pay their VAT (or even never submit any VAT returns) then HMRC will deregister the Chinese supplier and Amazon will remove them from their marketplace.
All of which means Amazon are not liable for the VAT the Chinese supplier owes.
Meanwhile the Chinese supplier registers for VAT with a new name and the whole saga continues.
Good info thank youThe rules mean that the online platform such as Amazon are liable if they have not checked that the supplier is VAT registered.
The Chinese suppliers are registered for VAT so Amazon isn't liable - Amazon simply won't let you sell if you are not VAT registered - and then if the Chinese suppliers don't pay their VAT (or even never submit any VAT returns) then HMRC will deregister the Chinese supplier and Amazon will remove them from their marketplace.
All of which means Amazon are not liable for the VAT the Chinese supplier owes.
Meanwhile the Chinese supplier registers for VAT with a new name and the whole saga continues.
this will also explain these news articles of peoples addresses being used to register on companies house and then receiving tax bills - all Chinese names and businesses
https://www.bbc.co.uk/news/uk-england-nottinghamsh...
https://www.bbc.co.uk/news/articles/ce7gpz301l4o
Tom8 said:
Can't remember if it was written on a bus or not but during Brexit debate we were told VAT was an evil EU tax and after Brexit we could bin it. Surely like everything else that was true?
The reason you can't remember it exactly was because no one, ever, not once, said that.In 2016, VAT brought in £114billlion. Do you really think that would just be allowed to be thrown in the bin ?
However, the removal of VAT of 5% on gas and electricity was talked about, but that is nothing like binning VAT.
jonathan_roberts said:
The idea of business is to make money. Deliberately keeping your business small to stay under the vat threshold is a ridiculous race to the bottom strategy. If you don’t grow you will die.
Just as people who fear earning more because they’ll be a top rate taxpayer, if you fear grow that comes with extra complication like a VAT registration, you’ll end up being lost in the doldrums anyway.
Not necessarily, take the electrician who is self employed and happily works on his own. He works 30 hours a week and manages to have enough time with his family. He has noticed that he is about to go over the VAT threshold. Just as people who fear earning more because they’ll be a top rate taxpayer, if you fear grow that comes with extra complication like a VAT registration, you’ll end up being lost in the doldrums anyway.
Does he
A) take a couple of less jobs during the year
Or
B) go full on and work 40-45 hours a week to make being VAT registered worthwhile in terms of overall profit, at the expense of family life.
A lot of people run businesses that don't want to grow or deal with the headaches that growing a business comes with.
You are absolutely right though in terms of certain businesses being about growth, mainly sales businesses.
jonathan_roberts said:
Just as people who fear earning more because they’ll be a top rate taxpayer, if you fear grow that comes with extra complication like a VAT registration, you’ll end up being lost in the doldrums anyway.
For example, if you are PAYE at around £100k and you get offered a new position at say £110k, but it's more than likely going to be a lot more work/stress/etc, what do you do ? Hmm, an extra £10k ? But after applying state sponsored theft, it's only £4k in your pocket - a lot of people will decide it's not worth the effort if they only get to keep 40p for every £1 extra they earn.But "fairness".
Edited by snuffy on Friday 2nd February 20:27
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