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Being VAT registered and buying from a non VAT registered

Discussion in 'Money, Accounts & Finance' started by bal, Aug 27, 2007.

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  1. bal

    bal

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    Jul 2, 2007
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    ok firstly I want to clarify :
    Suppose im VAT registered and I buy 117.50 (pound including VAT) of goods from a VAT registered supplier.
    Then I sell it for 176.25 (pound including VAT)
    so Ive paid 17.50 VAT to my supplier and I have charged 26.25 VAT to my customers. and the difference goes to the VAT man.
    26.25 - 17.50 = 8.75 to the VAT man

    But what happens If i bought from a non VAT registered business?

    thanks
  2. DSC

    DSC

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    All £26.25 would go to the VAT man as there is no VAT element in the sale price.
  3. m!ke

    m!ke

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    lol just think of it this way bal, you work for the vat man ,..you collect his vat, and in return he waves you vat on item/services you buy to run your biz,.
  4. anotheruser

    anotheruser

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    Aug 4, 2007
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    :crazy:
    Surely, there is no VAT element in the purchase price (i.e. the price you purchase at)?
    Does he? (I assume you mean waives?) Looks to me like he's telling you to absorb it. That means it's costing you more. If it was waived, it would be costing you less.

    Don't miscalculate this. If you are VAT registered, you recoup part of the amount of VAT you are paying, by deducting the purchase VAT element from what you pay to HMRC, when your supplier is VAT registered. if your supplier is not VAT registered, the odds are that he is rounding up the charge to you by the amount of VAT he has paid, and you can not claim that amount back.

    Put another way, your non-VAT registered supplier has to undercut your VAT registered supplier by a clear 17.5% in order to offer you a better price.
  5. greedyboy

    greedyboy

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    Think of it this way Mike, you earn interest on the money you collect from the VAT man and can boost your cash flow for up to 3 months and it only costs you the price of a stamp.

    You can also obtain your assets and operating costs VAT free.

    See, there are some benefits for working for the VAT man ;)
  6. DSC

    DSC

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    Correct anotheruser, my mistake. Whoops
  7. m!ke

    m!ke

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    anotheruser, thanks for the post, i really did over look that. - on a side note i read a few of your posts thru member of the month, good info, thanks for taking out the time and posting,

    greedyboy, better be more! :)
  8. Pete

    Pete

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    I have often thought a VAT / GST type system would be a great move for the US. But from the viewpoint of keeping track of it, I do wonder if I'm as for it as I thought.

    I guess it's that you owe the VAT out, less the VAT in you paid when you bought. But does that mean you have to track that on every purchase? You have six identical items in stock, which you bought at six different costs, so you have to keep up with the VAT you paid on each individual item? Or can you average it out as you would the cost, using "average cost" in an accounting system. Can you use "average VAT"?
  9. greedyboy

    greedyboy

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    It is a lot more simple as your purchases are already tracked via your suppliers invoices and your own invoices.

    Regardless of the price you pay, each invoice will have the VAT amount as a percentage. That is the amount you claim back.

    As for your sales, the same applies. Everytime you invoice a customer the VAT amount is automatically calculated and displayed.

    It is then just a case of Sales VAT minus Purchase VAT.

    You can also claim the VAT amount on all company purchases such as rent, computers, professional services and generally any business costs or business purchases.
  10. FTW

    FTW

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    Good thread. lets assume you have a business that you run from your house, and you have a room that you use as an offer. Lets also assume that you have notified your local council/planning etc and insurance company etc etc, could you charge VAT back pro rata on a mortgage that you may have. I understand VAT back on travel, stationery, office equip etc but not on a private home with a room for an office.

    Tim
  11. FTW

    FTW

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    'offer' should say 'office'.....doh!
  12. m!ke

    m!ke

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    FTW, but then wouldnt you get charged biz rates on the whole house, as its in commercial use ?
  13. greedyboy

    greedyboy

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    There is no VAT on a mortgage! :)
  14. FTW

    FTW

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    Just been looking into this as its quite interesting. Following abstract from BBC:-

    Mortgage costs are not really covered - it is possible to claim a small amount as the "cost of using your house as an office" but if you try to claim mortgage payments as a tax deductible expense, it is possible that this could give rise to a Capital Gains Tax charge when you sell your house.

    http://news.bbc.co.uk/1/hi/business/2968706.stm

    Tim
  15. anotheruser

    anotheruser

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    VAT isn't payable on the rent on your home, nor on a mortgage or the interest on it.

    You could claim VAT back for those things in your home you use entirely for business purposes such as a computer, chair, desk, and so forth. But not things that are likely to be used for general domestic activities such as cups, plates, even though you may use them during breaks from work.

    If you ask him, the VAT man's probably got a rule and something for you to read on it somewhere, whatever it is. ;o)
  16. meanmachine29

    meanmachine29

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    I put on 2 stone when I relised I could claim for restraunt recipts!!!
  17. anotheruser

    anotheruser

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  18. greedyboy

    greedyboy

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    But you can claim ;)

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