To VAT or Not to VAT? That is the question

[put_upon]

Hi All

I am selling a few items on eBay, but whenever I get to sell a dearer
item, it is usually to business to business customer who usually says
he won't buy unless he gets a VAT Invoice.

Since I don't really want to get into the VAT thing until the T/O goes
over £68.000 I wondered if there is anyway around this. Curious minds
need to know.

Bob

 

[Adrian]

I am selling a few items on eBay, but whenever I get to sell a dearer
item, it is usually to business to business customer who usually says he
won't buy unless he gets a VAT Invoice.

Since I don't really want to get into the VAT thing until the T/O goes
over £68.000 I wondered if there is anyway around this. Curious minds
need to know.

Simple. You aren't allowed to charge VAT or issue a VAT invoice to any
buyer unless you register for VAT - at which point, you have to charge &
invoice every buyer, but can reclaim VAT on your purchases.

If he doesn't want to buy from a non-VAT registered seller, that's his
lookout, but he really ought to be checking that before bidding on eBay.

 

[David Woolley]

If he doesn't want to buy from a non-VAT registered seller, that's his
lookout, but he really ought to be checking that before bidding on eBay.

I hope they are enquiring before bidding. If they bid, I would be
surprised if Ebay allowed them to back out unless there were reasonable
grounds to believe that the seller was or was legally obliged to be
registered.

 

[BartC]

Hi All

I am selling a few items on eBay, but whenever I get to sell a dearer
item, it is usually to business to business customer who usually says
he won't buy unless he gets a VAT Invoice.

Since I don't really want to get into the VAT thing until the T/O goes
over £68.000 I wondered if there is anyway around this. Curious minds
need to know.

Give them a VAT invoice for 0% due to being exempt.

 

[Tim]

Give them a VAT invoice...

Oh dear...........!!
As has already been stated by Adrian, that is
not allowed unless you are VAT-registered.

... for 0% due to being exempt.

Are you actually suggesting it should be Zero-rated
for VAT, -OR- that it should be VAT Exempt?
[Two different things.]

 

[Adrian]

Give them a VAT invoice for 0% due to being exempt.

Thank you for such a clear and concise proof of your lack of clue.

 

[BartC]

Oh dear...........!!
As has already been stated by Adrian, that is
not allowed unless you are VAT-registered.

"Sales Invoice ... VAT: exempt from charging VAT as not VAT-registered"

So, OK, not properly a "VAT" invoice. I'd be surprised if the buyer's
accounts can't deal with a purchase from a non-VAT-registered (ie. small)
business, that sounds discriminatory to me.

... for 0% due to being exempt.

Are you actually suggesting it should be Zero-rated
for VAT, -OR- that it should be VAT Exempt?
[Two different things.]

No, that the vendor is exempt from charging it.

 

[PeterSaxton]

"Sales Invoice ...   VAT: exempt from charging VAT as not VAT-registered"

So, OK, not properly a "VAT" invoice. I'd be surprised if the buyer's
accounts can't deal with a purchase from a non-VAT-registered (ie. small)
business, that sounds discriminatory to me.

Of course it's discriminatory. I discriminate in favour of better
quality goods and services. So what?

Are you actually suggesting it should be Zero-rated
for VAT,   -OR-   that it should be VAT Exempt?
[Two different things.]

No, that the vendor is exempt from charging it.

If the vendor is not VAT registered they cannot issue a VAT invoice.
What VAT number would they put on the invoice you suggest?

 

[Tim]

"Sales Invoice ... VAT: exempt from charging VAT as not VAT-registered"

So, OK, not properly a "VAT" invoice. ...

If it's *not* a VAT Invoice, then what's the point in giving it to them?

The buyer wants a VAT Invoice so they can re-claim (about)
13% of the cost of the item through their VAT Return; what
you're suggesting the seller provides would not let them do
this, so it would just be a total waste of everyone's time.

... I'd be surprised if the buyer's accounts can't deal with a
purchase from a non-VAT-registered (ie. small) business, ...

Of course they could "deal with" it, but they would then be paying 15%
more than if the seller was VAT-Registered, for the same headline price.

The buyer would be better off paying £115 to a VAT-Registered
seller (and claiming back £15 VAT) than paying just £105 to the non-
-VAT-Registered seller (which would effectively cost them £5 more).

 

[BartC]

If it's *not* a VAT Invoice, then what's the point in giving it to them?

It's the best that can be done. If it's possible for some transactions not
to have VAT invoices associated with them, then the buyer's accounts should
cope with that. What happens with imports and other sources that do not have
VAT applied?

The buyer wants a VAT Invoice so they can re-claim (about)
13% of the cost of the item through their VAT Return; what
you're suggesting the seller provides would not let them do
this, so it would just be a total waste of everyone's time.

The buyer will be saving 15% of the cost as well, so there's no need to
claim back 13% of the total to make up for it. *That* would be (and is) a
waste of everyone's time.

(When I was VAT-registered but selling to another EU country, I didn't have
to charge VAT, even though the country had it's it own VAT scheme, and
presumably they didn't have to claim anything back. Far more sensible.)

Of course they could "deal with" it, but they would then be paying 15%
more than if the seller was VAT-Registered, for the same headline price.

The buyer would be better off paying £115 to a VAT-Registered
seller (and claiming back £15 VAT)

On an item costing £100 from them?

than paying just £105 to the non-
-VAT-Registered seller (which would effectively cost them £5 more).

On an item costing £105 from them? You're suggesting the smaller company
will have higher base prices.

Suppose the VAT-registered company is selling at £105+VAT, and the non-VAT
registered one at £100, no VAT due? The buyer will then save £5, and helps
the cashflow by some £16, by being more flexible with their purchase
options.

 

[Tim]

It's the best that can be done. ...

But it's not what the buyer wants, so they might as well
not bother with that "invoice" at all.

The buyer will be saving 15% of the cost as well, ...

No, they won't - if the buyer needs to bid £115 on ebay to win the auction,
then with a VAT-Registered seller, s/he ends up paying £100 for the item.
But with a non-VAT-Registered seller, s/he ends up paying £115 for the item.
See?

... so there's no need to claim back 13% of the total to make up for it.

The problem is that the buyer is competing on ebay
against other buyers who aren't VAT-Registered, and
therefore are happy to pay £115 to either type of seller.

*That* would be (and is) a waste of everyone's time.

Not a waste of the buyer's time, as s/he then gets that extra "discount".

On an item costing £100 from them?

On an item where the winning ebay bid was £115.

On an item costing £105 from them? ...

On an item where the winning ebay bid was £105.

... You're suggesting the smaller company will have higher base prices.

Not at all. I'm pointing out that it could actually
cost the buyer *more* if they buy on ebay from a
non-VR seller, **even if** the winning bid is *less*!!

Suppose the VAT-registered company is selling at £105+VAT,
and the non-VAT registered one at £100, no VAT due? ...

Are you suggesting that the winning bid on the VAT-Registered
seller's ebay auction is likely to be more than 15% higher
than the winning bid on the non-VR seller's ebay auction?

 

[BartC]

But it's not what the buyer wants, so they might as well
not bother with that "invoice" at all.


No, they won't - if the buyer needs to bid £115 on ebay to win the
auction,
then with a VAT-Registered seller, s/he ends up paying £100 for the item.
But with a non-VAT-Registered seller, s/he ends up paying £115 for the
item.
See?

No. I'm completely confused now. I didn't know there were special rules for
VAT on ebay transactions, other than the final auction price not being known
when bidding.

But yes, given the same article from two different sellers at the same (or
near) price, the one that's VAT-registered has the potential for a refund of
VAT that could make the net cost lower. But there is also the potential for
the other seller to have a lower price anyway (I think an intended
competitive advantage).

Completely ruling out purchases from non-VAT-registered sellers also rules
out those potential lower prices. I'm assuming the VAT status of sellers is
known when bidding so that one price can be properly compared with another.

 

[Adrian]

No. I'm completely confused now. I didn't know there were special rules
for VAT on ebay transactions, other than the final auction price not
being known when bidding.

There aren't. Why would you think there are?

The situation described above would be the same for any two sellers -
fleaBay, web, bricks'n'mortar retail.

But yes, given the same article from two different sellers at the same
(or near) price, the one that's VAT-registered has the potential for a
refund of VAT that could make the net cost lower. But there is also the
potential for the other seller to have a lower price anyway (I think an
intended competitive advantage).

There is, but given that fleaBay is a marketplace where most buyers are
non-VAT-reg, it's probably not going to happen, since the final price is
the only one that's relevant to most potential buyers.

 

[PeterSaxton]

No. I'm completely confused now. I didn't know there were special rules for
VAT on ebay transactions, other than the final auction price not being known
when bidding.

There's no special rules for VAT on ebay.

But yes, given the same article from two different sellers at the same (or
near) price, the one that's VAT-registered has the potential for a refundof
VAT that could make the net cost lower. But there is also the potential for
the other seller to have a lower price anyway (I think an intended
competitive advantage).

Ebay is just like any other purchase and sale.

Completely ruling out purchases from non-VAT-registered sellers also rules
out those potential lower prices. I'm assuming the VAT status of sellers is
known when bidding so that one price can be properly compared with another.

Who thinks ruling out purchases from non-VAT registered sellers is a
sensible option?

 

[BartC]

There's no special rules for VAT on ebay. ....
Ebay is just like any other purchase and sale.

Tim's comments about competing ebay auction bids confused the issues for me.

Who thinks ruling out purchases from non-VAT registered sellers is a
sensible option?

For one, the OP's buyer who insisted on a VAT invoice.

 

[PeterSaxton]

Tim's comments about competing ebay auction bids confused the issues for me.





For one, the OP's buyer who insisted on a VAT invoice.

The OPs buyer is an idiot. You can't insist on a VAT invoice from a
non-registered person.

 

[Tim]

.
Tim's comments about competing ebay
auction bids confused the issues for me.

What bit confuses you?

If they bid £115 with a VAT-Reg seller, they pay them
£115 and reclaim £15 input VAT, then it's cost them £100.

But if they bid £115 with a non-VAT-reg seller,
they pay them £115 and it's cost them £115.

 

[BartC]

.

What bit confuses you?

If they bid £115 with a VAT-Reg seller, they pay them
£115 and reclaim £15 input VAT, then it's cost them £100.

But if they bid £115 with a non-VAT-reg seller,
they pay them £115 and it's cost them £115.

If you're VAT-registered then you compare VAT-exclusive prices if there is
VAT added.

Which of these prices would be cheaper in that case:

£90 (no VAT) (no VAT invoice supplied)
£100+VAT (VAT invoice supplied)
£110 (no VAT) (no VAT invoice supplied)

Clearly the £90 item. Which price is cheapest when you require a VAT
invoice? Only one option and that's £100, but you have to pay £115 and need
extra paperwork to eventually get back that £15.

 

[Ronald Raygun]

What bit confuses you?

If they bid £115 with a VAT-Reg seller, they pay them
£115 and reclaim £15 input VAT, then it's cost them £100.

But if they bid £115 with a non-VAT-reg seller,
they pay them £115 and it's cost them £115.

Are you sure it always works like that? I think I've seen
ebay offers from VAT registered sellers advising bidders that
they are bidding on an ex-VAT basis and that VAT will be added
to the amount of the winning bid. This would mean that a
VAT-reg buyer who bids £100 would pay £115 and reclaim £15,
so it costs them £100, while a non-VAT-reg buyer who bids £100
would pay £115 and that's what it would cost them.

The effect is that in the case of a non-VAT-reg seller, the
real cost to a buyer is the same no matter whether the buyer
is VAT-reg or not, and is equal to the amount of the bid noted,
while in the case of a VAT-reg seller, the real cost to the
two kinds of buyer differs, but the bid noted may be inclusive
or exclusive of VAT, and it is important for the bidder to be
aware of which it is.

Presumably the onus is on the seller to make clear what's what,
and in the absence of any mention of VAT, a non-VAT-reg buyer
should be entitled to assume that what they bid is what it will
cost them (i.e. no VAT will be added), and a VAT-reg buyer
should *not* be entitled to assume that the seller is VAT-reg
and so should *also* assume that what they bid is what it will
cost them (i.e. no VAT can be "subtracted").

 

[Ronald Raygun]

If you're VAT-registered then you compare VAT-exclusive prices if there is
VAT added.

And if there isn't?

Which of these prices would be cheaper in that case:

£90 (no VAT) (no VAT invoice supplied)
£100+VAT (VAT invoice supplied)
£110 (no VAT) (no VAT invoice supplied)

Clearly the £90 item.
Correct.

Which price is cheapest when you require a VAT
invoice? Only one option and that's £100, but you have to pay £115 and
need extra paperwork to eventually get back that £15.

No, this is wrong. No buyer ever *requires* a VAT invoice except in
order to recover input VAT, which is only possible when both buyer and
seller are VAT registered. No buyer can require a VAT invoice from a
non-reg seller, because the law of the land forbids the seller from
issuing one.

There is nothing to stop a regd buyer from buying from a non-reg seller,
but of course any invoice they get will not be a VAT one, and thus any
VAT which might be "hidden" in the price will be irrecoverable. The OP's
buyer may have *requested* a VAT invoice because they mistakenly assumed
the OP to be registered. But that's just too bad. They ought to have
checked the seller's VAT status before they bid.