Hammond To Reduce VAT Threshold In Budget?

Hammond To Reduce VAT Threshold In Budget?

Author
Discussion

fishseller

359 posts

93 months

Saturday 18th November 2017
quotequote all
PurpleMoonlight said:
alock said:
I'm PAYE but write and sell software through my own LTD in my spare time. I have very few expenses to produce my product.

I'm soon going to have to pay VAT alongside the corporation tax and dividend tax I already pay? I don't know why I bother trying.
You won't pay VAT, you will collect it for HMRC by charging it to your customers.
But say your margins are to the bone and struggle to sell your product at the price point it is at, then then how can you up the price by 20% no one will purchase so either take an extra 20% loss or shut shop I think a lot of small enterprises will do just that.

PurpleMoonlight

22,362 posts

156 months

Saturday 18th November 2017
quotequote all
fishseller said:
But say your margins are to the bone and struggle to sell your product at the price point it is at, then then how can you up the price by 20% no one will purchase so either take an extra 20% loss or shut shop I think a lot of small enterprises will do just that.
Won't the competition likely be in the same boat?

So prices across the board will increase by 20%.

fishseller

359 posts

93 months

Saturday 18th November 2017
quotequote all
PurpleMoonlight said:
fishseller said:
But say your margins are to the bone and struggle to sell your product at the price point it is at, then then how can you up the price by 20% no one will purchase so either take an extra 20% loss or shut shop I think a lot of small enterprises will do just that.
Won't the competition likely be in the same boat?

So prices across the board will increase by 20%.
Do you think? I sell a lot on e-bay and some sellers are selling for way below cost price with free postage to boot so wont be upping prices by 20%

Super Slo Mo

5,368 posts

197 months

Saturday 18th November 2017
quotequote all
It also depends if you are competing with sellers from the likes of China. They don’t worry about nonsense like VAT as it’s the buyer’s responsibility if it gets stopped by customs on the way in.
That’s almost 17% off U.K. sellers profits before we even think about eBay and PayPal fees and other costs.
I think also the Chinese et al have massive buying power so can offer lower prices than we can buy for.
That said, I’m clearing a load of stock off at well under cost price as it’s been sitting around for too long. Unfortunately my supplier released an upgraded model shortly after I bought my last batch, which rendered mine pretty much obsolete.

akirk

5,376 posts

113 months

Saturday 18th November 2017
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mickmcpaddy said:
Can you still claim back the previous 5 years of VAT you have paid when you register.
not that simple, depends what the item was and whether you still have full use... e.g. If you buy a pack of 100 pencils but have used 50 before you register, you could reclaim half the VAT...

fishseller

359 posts

93 months

Saturday 18th November 2017
quotequote all
akirk said:
mickmcpaddy said:
Can you still claim back the previous 5 years of VAT you have paid when you register.
not that simple, depends what the item was and whether you still have full use... e.g. If you buy a pack of 100 pencils but have used 50 before you register, you could reclaim half the VAT...
But if you are not vat registered you still claim back the gross amount of any business expenses so you had the vat back anyway !

hairyben

8,516 posts

182 months

Saturday 18th November 2017
quotequote all
akirk said:
mickmcpaddy said:
Can you still claim back the previous 5 years of VAT you have paid when you register.
not that simple, depends what the item was and whether you still have full use... e.g. If you buy a pack of 100 pencils but have used 50 before you register, you could reclaim half the VAT...
was a few years ago so maybe different now but VAT people were happy for me to claim for stocks and assets in hand at time of reg, which was very useful, after my penis of an accountant screwed up and landed me a large VAT demand - this wiped out about 80% of it.

C Lee Farquar

4,066 posts

215 months

Saturday 18th November 2017
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singlecoil said:
As a kitchen maker I usually let it slip that I trade just under the VAT limit. Customers seem to like that, it helps explain why my stuff is such remarkably good value smile
And you're not reclaiming VAT on your purchased materials, machinery or running costs, unlike those tax avoiding VAT registered Companies. Despite what Welshbeef thinks.

mickmcpaddy

1,445 posts

104 months

Saturday 18th November 2017
quotequote all
C Lee Farquar said:
singlecoil said:
As a kitchen maker I usually let it slip that I trade just under the VAT limit. Customers seem to like that, it helps explain why my stuff is such remarkably good value smile
And you're not reclaiming VAT on your purchased materials, machinery or running costs, unlike those tax avoiding VAT registered Companies. Despite what Welshbeef thinks.
As someone said above though, you claim the gross amount of materials (vat included) against your proffits so still get it back anyway.

thinking about it, if you're not vat registered then you don't have to pay tax and national insurance on this amount which is more than 20% but if you claim the vat back then you only get 20% back, am I wrong?

singlecoil

33,308 posts

245 months

Saturday 18th November 2017
quotequote all
mickmcpaddy said:
C Lee Farquar said:
singlecoil said:
As a kitchen maker I usually let it slip that I trade just under the VAT limit. Customers seem to like that, it helps explain why my stuff is such remarkably good value smile
And you're not reclaiming VAT on your purchased materials, machinery or running costs, unlike those tax avoiding VAT registered Companies. Despite what Welshbeef thinks.
As someone said above though, you claim the gross amount of materials (vat included) against your profits so still get it back anyway.

thinking about it, if you're not vat registered then you don't have to pay tax and national insurance on this amount which is more than 20% but if you claim the vat back then you only get 20% back, am I wrong?
I'm afraid I'm not following you. Could you rephrase the question?

mickmcpaddy

1,445 posts

104 months

Saturday 18th November 2017
quotequote all
Well if you vat registered and you pay £10+vat for something you claim back the £2 and put £10 against your profits for income tax and national insurance.

However if you are not vat registered you claim £12 against income tax and NI.

fishseller

359 posts

93 months

Saturday 18th November 2017
quotequote all
mickmcpaddy said:
Well if you vat registered and you pay £10+vat for something you claim back the £2 and put £10 against your profits for income tax and national insurance.

However if you are not vat registered you claim £12 against income tax and NI.
Correct thumbup

mickmcpaddy

1,445 posts

104 months

Saturday 18th November 2017
quotequote all
fishseller said:
mickmcpaddy said:
Well if you vat registered and you pay £10+vat for something you claim back the £2 and put £10 against your profits for income tax and national insurance.

However if you are not vat registered you claim £12 against income tax and NI.
Correct thumbup
So you are financially better off not being VAT registered?

Super Slo Mo

5,368 posts

197 months

Sunday 19th November 2017
quotequote all
mickmcpaddy said:
fishseller said:
mickmcpaddy said:
Well if you vat registered and you pay £10+vat for something you claim back the £2 and put £10 against your profits for income tax and national insurance.

However if you are not vat registered you claim £12 against income tax and NI.
Correct thumbup
So you are financially better off not being VAT registered?
No, not by a long way.

Using your example above, and assuming tax is 20%, employers NI is 13.8%:

Non VAT Reg you effectively get 33.8% back, which is £4.05 on the original £12.00

VAT Reg you get your £2.00 VAT plus 33.8% of the remaining £10.00 giving you a total of £5.38 back.

Assuming my maths and assumptions are correct of course.

ETA: Employers NI might actually be employees if you are a sole trader. I don’t know if this is correct as I’ve not done the sole trader thing since at least 2005. The principle is exactly the same anyway, all it means is that the totals will be different by the same proportion.

Edited by Super Slo Mo on Sunday 19th November 05:35

singlecoil

33,308 posts

245 months

Sunday 19th November 2017
quotequote all
fishseller said:
mickmcpaddy said:
Well if you vat registered and you pay £10+vat for something you claim back the £2 and put £10 against your profits for income tax and national insurance.

However if you are not vat registered you claim £12 against income tax and NI.
Correct thumbup
So the more you pay for your stock the better off your business is? smile

PurpleMoonlight

22,362 posts

156 months

Sunday 19th November 2017
quotequote all
singlecoil said:
fishseller said:
mickmcpaddy said:
Well if you vat registered and you pay £10+vat for something you claim back the £2 and put £10 against your profits for income tax and national insurance.

However if you are not vat registered you claim £12 against income tax and NI.
Correct thumbup
So the more you pay for your stock the better off your business is? smile
It's all dependent on what the item is being sold to the consumer for.

If that matches the vat inclusive price the non vat registered sellers profit is greater.

If that is the vat exclusive price the non vat registered sellers profit is less.

singlecoil

33,308 posts

245 months

Sunday 19th November 2017
quotequote all
PurpleMoonlight said:
singlecoil said:
fishseller said:
mickmcpaddy said:
Well if you vat registered and you pay £10+vat for something you claim back the £2 and put £10 against your profits for income tax and national insurance.

However if you are not vat registered you claim £12 against income tax and NI.
Correct thumbup
So the more you pay for your stock the better off your business is? smile
It's all dependent on what the item is being sold to the consumer for.

If that matches the vat inclusive price the non vat registered sellers profit is greater.

If that is the vat exclusive price the non vat registered sellers profit is less.
Selling for less than you bought it for will always result in less profit.

PurpleMoonlight

22,362 posts

156 months

Sunday 19th November 2017
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Black friday sale.

bristolracer

5,527 posts

148 months

Sunday 19th November 2017
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Somebody has to make up the tax shortfall that Apple google amazon etc won’t pay.

Murph7355

37,646 posts

255 months

Monday 20th November 2017
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PurpleMoonlight said:
Black friday sale.
You think those firms are selling for less than they paid?