VAT Threshold & Help Required


S

smokey

My friend has a salvage yard, he's been buying all types of materials
and selling them on, his purchases don't have any VAT on at all. He's
been advised that the threshold is about £65,000 until he has to go
VAT registered and Company Registered. He will make roughly about 16%
of this figure - £10,400.

So basically he's been told that at the £65,000 point his sales will
be split up like so £55319 net and £9680, as he doesn't pay out any
VAT on the purchase side, this means that it will come straight out of
his profit. Leaving him with with £720 from his company, for the whole
year (Profit £10,400 less VAT £9,680).

This seems very strange and very unfair if this is the actual correct
method of doing things?

Can anyone please help, to see whether there is a way around this, or
whether this is the true method?

(I'm aware he could always stay within the threshold, but he expects
business to double, treble by next year).
 
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T

Troy Steadman

My friend has a salvage yard, he's been buying all types of materials
and selling them on, his purchases don't have any VAT on at all. He's
been advised that the threshold is about £65,000 until he has to go
VAT registered and Company Registered. He will make roughly about 16%
of this figure - £10,400.

So basically he's been told that at the £65,000 point his sales will
be split up like so £55319 net and £9680, as he doesn't pay out any
VAT on the purchase side, this means that it will come straight out of
his profit. Leaving him with with £720 from his company, for the whole
year (Profit £10,400 less VAT £9,680).

This seems very strange and very unfair if this is the actual correct
method of doing things?

Can anyone please help, to see whether there is a way around this, or
whether this is the true method?
That is the true method, and it hits people like hairdressers very
hard.
(I'm aware he could always stay within the threshold, but he expects
business to double, treble by next year).
When you have your next haircut have a look at how the hairdresser
copes with this problem - several tills representing several
businesses who happen to share the same premises and each trading
below the threshold.

Unlike the hairdresser your mate will fall into the second hand margin
scheme, so not so bad:

<QUOTE>

2.7 Which goods are eligible and ineligible for the scheme?
Paragraph 25.1 reproduces the law on eligible goods. It defines second-
hand goods, works of art, antiques and collectors' items and details
goods excluded from the scheme. The following guidance will help you
interpret the law.

(a) Second-hand goods (including motor vehicles). The legal definition
is that eligible goods are goods suitable for further use as they are
or after repair. In most cases goods which are second-hand in the
ordinary usage of the term will be eligible for the Margin Scheme.

</QUOTE>

http://customs.hmrc.gov.uk/channels...HMCE_CL_000145&propertyType=document#P81_8142

http://tinyurl.com/345a9j
 
D

DoobieDoo

Can anyone please help, to see whether there is a way around this, or
whether this is the true method?

Using your figures, at £65,000 he'll then start charging VAT to his
customers, so a £100 item will be £100+VAT = £117.50. The £17.50 will go to
the VAT man - because he has no purchase VAT to reclaim (forget the bits of
VAT on stationery, fuel, etc. for now)

If he doesn't charge the VAT on top of his prices and sells it for £100 then
yes he's standing the VAT out of his profits.
 
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P

Peter Saxton

My friend has a salvage yard, he's been buying all types of materials
and selling them on, his purchases don't have any VAT on at all. He's
been advised that the threshold is about £65,000 until he has to go
VAT registered and Company Registered. He will make roughly about 16%
of this figure - £10,400.

So basically he's been told that at the £65,000 point his sales will
be split up like so £55319 net and £9680, as he doesn't pay out any
VAT on the purchase side, this means that it will come straight out of
his profit. Leaving him with with £720 from his company, for the whole
year (Profit £10,400 less VAT £9,680).

This seems very strange and very unfair if this is the actual correct
method of doing things?

Can anyone please help, to see whether there is a way around this, or
whether this is the true method?

(I'm aware he could always stay within the threshold, but he expects
business to double, treble by next year).
Who is this "advisor"? What is this rubbish about "company
registered"? The threshold is £64,000 not "about £65,000".
 

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