what i meant was that you buy an item for £10 inc VAT and sell for £15.
if you are not VAT registered. you have no VAT to pay i.e. the £5 mark up is yours (not considering other costs)
however you are registered:
you claim back 17.5% of £10 = £1.75 (£8.25 cost price)
and pay 17.5% on the sale price of £15 = £2.63 (rounded up) (£12.37 ex VAT sale price)
£12.37 - £8.25 = £4.12
so you left with £4.12 compared to £5 if you are not registered.
hope this explains it better
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