Rubbish
VAT is all about input tax and output tax. It's perfectly permissible for a VAT registered organisation to recover input tax without making a sale of the specific item.
For example, I can recover the cost of fuel to go and see a customer, plus the overnight stay, but I am not in the oil or hotel businesses.
Small is also limited.
- For jobs that you do where the materials are a significant part of the total, you are passing on the VAT anyway.....
- Your transport costs also include the VAT.
Really, the only thing for which you are not charging VAT is your time..... You are absorbing the rest in your prices. If others are charging VAT explicitly because they are registered and their prices actually are 17.5% more, then you are missing out on a margin opportunity because of not being able to recover the input tax.
Either way, you are still a tax collector....
80/20 domestic/commercial - in money terms.
VAT is payable at the end of the chain.. you cannot legally claim it back if you don't sell on. If you are claiming back VAT for stuff you don't sell on please feel free to post details and I am sure the VAT inspector will be around to confirm what I say.
You can if its revenue and you are using it to provide a service.. tools are capital are they not?
VAT is not item specific - it's the difference between the input tax and the output tax that is remitted to the Guvmint - or in some cases, remitted by the Guvmint back to the business as a VAT refund.
Owain
You're confusing VAT payments with expenses allowable against income-tax. The VAT on a tool goes into this quarter's VAT account, the cost of the tool itself into the capital account, and the depreciation of the tool is allowed against income-tax as an expense.
Owain
No that does not make sense. VAT on your "cost of sales" is reclaimable, since it is in effect reducing the nett value added. So any tool, whether it is sold on, or simply used in the production of your work, or written off, would have the VAT reclaimed. As would all consumables be they fuel, fein multimaster blades etc, or the costs of advertising, or any services purchased (accountancy, IT etc).
VAT is a simple sum; you pay Gorden the difference between the VAT on all vattable items you sell and the vat on all vattable items you buy. This is how it is possible to get a VAT refund.
(Note there is also the option of a flat rate VAT scheme where you don't even account for individual purchases and sales, and the VAT calculation is based on turnover and a flat rate that is based on your industry sector (and hence includes some estimation of your typical costs))
VAT inspectors have never had a problem with it. In fact they seem only too keen to make sure you are claiming VAT on as many things as possible.
If you are self employed... and for companies it is allowable against profits and hence corporation tax for the company.
Some items can also have their full value written off for tax purposes straight away. These include consumable items, and certain categories of investment that Gordon sees fit to play at social engineering with at the time.
VAT is not only charged on goods. It is on services too. And isn't calculated on a job basis but on the overall trading of that firm over a period of time. So for example the if the fee the firm's accountant charges them includes VAT that is an outgoing VAT charge to be offset against the incoming ones from their trading in the same way as goods or materials.
Yes you do.
That's utter s**te. I operate a consultancy. I don't sell goods at all, but I can still reclaim input VAT on all of the items bought for the business.
I can for example reclaim VAT on all my hotel bills. I don't then have to sell a night in a hotel to someone.
You are quite wrong.
VAT is a simple accounting of input and output tax. Goods and services purchased by a registered business are deductable as input tax while anything sold that is subject to VAT and not exempt forms the subject of output tax. The government nets the difference between the two, which is the whole point.
There are even some apparent anomalies which may still exist depending on exemptions.
One classical example was (maybe is) the printing and publishing of certain materials such as books, magazines etc. which, AIUI, are zero rated for VAT purposes. However, paper and ink, the electricity for the presses and the diesel for the delivery vehicles to name but some items used in such a business do carry VAT. The business can perfectly legitimately recover the input VAT on its expenses while not charging its customers.
Another example that I know for certain is the case is if one imports goods as a VAT registered business from non-EU countries. In this scenario, VAT is due at place and time of import unless a deferrment arrangement has been agreed with HMRC. If I sell those goods to a VAT registered company elsewhere in the EU, the VAT on the invoice will be zero because this is a zero rated transaction. Moreover, I can recover the import VAT through my VAT accounting and in effect HMRC wind up with zero, which is the correct accounting in this case. Had the customer in the other country not been VAT registered, I would invoice with UK VAT where rated.
You may wish to call your local VAT office for confirmation of all of this.
It depends on how they are treated for accounting purposes, but the VAT is still recoverable anyway.
No need I have checked already.. To quote from the VAT people "VAT is a tax on the final consumption of certain goods and services." A business may be the final consumer of goods and services.
However it would appear that the government changed the rules to reduce red tape for smaller firms and they now operate the input output system. I don't know at what point you can no longer operate that system and end up paying the VAT.
So I was right but I am nolonger right AFAICS. 8-(
Sort of.
If vat registered, not in this context.
Well, it's neither at the small trader, 50,000 quid level, nor at the multi-hundred-million pound turnover largish company level. And that's been the case ever since I've known about VAT.
Input/Output is the normal way it's done. As has been mentioned elsewhere, there are various schemes to make life easier for some smaller traders - but they're the special cases, not input/output.
Not sure you ever were...
clive
No, you were never right, not even under the old VAT accounting rules.
Indeed, don't think anyone was disputing that.
If the business is VAT registered then there are only a few limited cases where that is true. Most expenses a business incurs are part and parcel of the cost of doing business, and hence the VAT is reclaimable. There are a couple of anomalies such as the inability to reclaim VAT on cars, but as a general rule a business will reclaim all the vat on everything it buys for whatever purpose - including the booze for the Christmas party.
They have not changed the rules for the general operation of VAT any time recently (with exception of the way rebates are paid on certain high value goods transacted within the EU - to combat missing trader or carousel fraud). They have introduced a flat rate scheme that you can opt to run in place of normal VAT accounting for input and output tax. Here you simply pay a percentage of your turnover.
Well perhaps, but not any time in the last 16 years (we have been VAT registered since '91)
Nope. You've never been right.
Unless you are a bank or a second-hand car dealer.
:o)
That's always been the case. What has changed is a method of accounting the VAT for small businesses.
No - you were wrong in implying it only operated on goods and had to be calculated over just one job.
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