The Wholesale Forums

[UKguy2006]

Hello, pretty lucky to stumble across this website... hopefully some of you guys might be ablt to help me?

I've been selling on ebay and planning on becoming a sourcing agent for sellers by importing electronics for them. How I'm planning on doing this is taking orders and payments and forward this to the suppliers, they then send the stock to the buyer. Taking about 5% commission in the process for smaller orders and less for larger orders.

After doing a few sums, because I handle and forward payment towards the supplier my turnover balloons. So its looking like I will need to be VAT registered. If this is the case then wouldn't that mean I won't be making any profit? if VAT is 17.5% of my total turnover? So I'll be down 17% after profits everytime because I have to give that to the VAT man?

I'm a bit of a newbie so I've probably missed something here... so I would welcome any advice.

Cheers

[AALG_Andy]

Welcome to the forum,

If you are going into this in a big way, then I'd suggest you talk
to an accountant and get some decent advice.

VAT can be a tricky subject to get your head around.


Andy

[diablo audio]

Have a look around the forum as you can probably find out soem of the info that you are looking for. Here's a couple threads that you may be interested in:

TARIC code/product code

What's VAT?

There's a bunch more on the issue so have a look around .

[nocturnal]

You're going to have to pay VAT on the goods clearing customs this amount will get offset against the VAt revenue you take in once you sell the goods on.
e.g say you import net 5k value of goods and have to pay £875 on VAT. Next you then sell them on for gross 7k, you will be due to pay VAT of £1043 from the 7K sale.

The total Vat you would pay is 1043 - 875= 168

Unfortunately if you are selling to non VAt registered buyers they just have to swallow the cost.

Probably still better off talking to an accountant though.

[Anglo-Sino]

We do amongst other things what you are proposing in fact it is the core of our business. One question I have is how are you going to guarantee product quality if you are thousands of miles from the factory...often there is not a problem but just in case. Please note I am not trying to knock your idea, please take this as "something to think about" as horror stories can happen.
Moving on VAT is not an issue..I think our first order took us to the VAT threshold so yes it is advisable. Most companies if you are selling to them in bulk will be VAT registered (in our experience). As suggested above you import the goods and pay VAT/duty on clearance. So this has gone out of the "pot". On the VAT return every three months you can claim the VAT back ie on any purchases where you have paid VAT whether this is for imports or for a PC (so long as it is a legit business purchase!) When you sell the goods you charge VAT this higher rate is then paid to the "VAT man" on your next return....so don't spend it!
Good luck with your venture I am sure you will find it worthwhile.

[UKguy2006]

Cheers Anglo, product quality is def an issue that I'll have to check, I have friends and family over there who can pop in to the suppliers to have a look, I've ordered a few samples and everything seems kocher for now. But friends and family can double check if needed to see if they have stock. Being small and new to wholesale importing, I can't afford to lose too much money

The VAT issue is a bit clearer, though it might seem that I may have to directly import them myself rather then having it shipped direct to the buyers in the UK so I can reclaim the VAT on import as I will have an invoice from Customs? Think a ring to my accountant is probably the best way to clear things as I'm still struggling to get my head round it

Cheers

[Anglo-Sino]

What you can do....the customer places an order for 20000 radios at £1 per piece excluding VAT. Lets say they pay up front as it is the easiest scenario. So they pay you £20000GBP + VAT (£23500). You pay the supplier (for example 30% deposit and 70% on shipping) BL is made out in your name arrives in the UK and you pay the shipping agent clearance costs, duty VAT etc. The duty and VAT however are based on cost price + Shipping then duty then VAT. Now cost price is of course going to be lower than your selling price...unless you have screwed up! Lets look at this in figures;

Cost price for each radio including shipping is lets say .50p duty 5% and VAT 17.5%. So all in about .62p each. Almost 10p is VAT which you can claim back, over 20k pieces it is 2000GBP. As you can see the VAT man is happy to give you 2k as he is getting 3500GBP when you resell!

Now back to how you do this. You can act as a middle man charging x % as a sourcing fee but if you have the goods shipped to the customer there is nothing to stop them from going direct. Been there, tried that! Regarding having to import direct no you can still have the customer pay everything including the VAT and duty so you do not necessarily need to import yourself. You can just act as a sourcing agent.

There are various ways to do this but you need to look at what is best for you....and yes if you are unsure let an accountant talk you through things.

[mazzster]

I'm a trainee accountant, over half way towards qualifying so hopefully reasonably adept! The advice above seems pretty much correct.

There is nothing to stop you having your goods delivered to one address (ie your customer) but have the invoices sent to another (ie you) so you can then have invoices to reclaim input VAT without having to incur shipping costs twice, also saves a bit of risk your end with regards to insuring stored stock etc.

If you have any specific tax questions feel free to e-mail me, and if I don't know the answer off the top of my head I can probably look it up.

[ara-uk]

See this thread for info. on VAT.

[UKguy2006]

Cheers guys , you've all been a great help starting to understand this whole VAT issue better and starting to see venture being feasable

I'll probably go down the resourcing agent route for now and have the invoices sent to myself. I know there is a risk that buyers will go direct to supplier, but have spoken to them and they agree to place my own invoice and company name on the documents... not sure if this will be affective in keeping supplier contacts hidden from buyers? Suppose it still has to have an address origin...

To claim back the VAT on import charges I was told that I can set up an account with the shipping agent such as Fedex, DHL, UPS etc who will automatically forward import charges to myself even if goods are delivered straight to customer? Is it possible to have my VAT number on the import docs so its charged to me?

Selling to non VAT registered buyers seems relativley simple enough... but if I were to sell goods to VAT reg buyers... do I still need to pay customs upfront and claim back later? prob means I'll need a loan to cover initial VAT costs.