Re: Trading outside the EU to profit from the VAT system
- From: sharky <bill@xxxxxxxxxxx>
- Date: Thu, 08 Sep 2005 02:54:39 +0100
Graeme wrote:
Hi to all the regulars, especially Ronald.
I haven't been posting for a while now, still working on building my business up i.e. www.abetterworld.co.uk.
However, (unfortunately or otherwise) last night my obsessive brain returned to thinking about my old " VAT avoidance trading scheme" and how (as Ronald will testify) I could not get it to "work" previously.
After a year or two break and thinking about the problems afresh I'm hoping that I can now do so.
Remember the illustrative trading companies i.e. Tom, Dick and Harry and the hypothetical (before and after) yearly "accounts".
So before participation in the scheme Tom has the following set of "accounts":
£100K sales
£20K stock costs £10K wages
That's it i.e. no other deductions.
So £70K liable to CT correct?
The VAT liability would be calculated thusly:
£100K sales so Tom has collected £17.5K Output VAT.
The Input VAT = "£20K stock costs" so this'd be £3.5K
Thus Tom sends the VAT man a cheque for (£17.5k - £3.5k) £14k
Correct so far?
Now let's imagine the same set of accounts after Tom has participated in my "hypothetical scheme" with me being Dick.
Dick sells Tom goods to the value of £100K.
Dick then helps Tom to sell those goods to Harry (located outside the EU) for £100K.
No money is made on the sale of these goods so obviously neither Tom nor Dick can benefit in this regard.
However, now when Tom calculates the Input VAT:
£20K original stock costs + £100K additional stock costs = £120K total stock costs
Giving £21K Input VAT
The Output VAT would be exactly as before i.e:
£100K original sales collecting £17.5K Output VAT.
£100K additional sales would be exempt from VAT.
So now (after participation in the scheme) the VAT man would be sending Tom a cheque for (£17.5K - £21K) £3500.
Correct?
So my question to Ronald and others. Does my scheme now work i.e does Tom benefit financially from participation?
Err no, the extra £100k worth of stock that you bought to sell overseas for this 'dodge' would have had vat of £17,500 on (gross cost £117,500).
So you are claiming back money you have already shelled out.
Or if you're saying you bought stock for £20k and are selling it for £100k, you can still only claim back vat THAT YOU ACTUALLY PAID in the first place.
.
- References:
- Trading outside the EU to profit from the VAT system
- From: Graeme
- Trading outside the EU to profit from the VAT system
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