Re: VAT Threshold & Help Required
- From: jimmythehoover2@xxxxxxxxxxx
- Date: Sun, 10 Jun 2007 05:11:46 -0700
On Jun 6, 6:45 pm, "tim....." <tims_new_h...@xxxxxxxxxxx> wrote:
"smokey" <lr_thomp...@xxxxxxxxxxx> wrote in message
news:1181125627.494411.255040@xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
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?
--------------------------------------------------------
No it isn't the correct way of doing it.
Once he realises that he will go over the VAT threshhold he
should register and add VAT, which will put up his prices by
17.5%. He won't have to account retrospectively as long as
he registers as soon as the rules say that he should.
The VAT registration threshhold is calculated quartely using
an amount slightly more than a quarter of the annual amount.
If his market can't absorb this VAT increase then he's probably
in a business that isn't sustainable and should look to do
something else.
tim
.......................................................................................................................................................................
Simple way to look at it..............
Your friend doesn't pay VAT at all, his customer does. He simply adds
17.5% to each of his sales and records the extra 17.5% in a separate
ledger. Example: if he sells £100,000 of stock, in 12 months, his
total takings will be £117,500. At the end of a 'quarter' he gives the
VATman the amount he has 'collected', for him, from his customers. The
trick is, to keep the VATman's share separate to your own, right from
the start, and 'don't use it' . By doing that, and looking at the
aforementioned figures, your friend can invest the VATman's money in a
high return/easy access account and make a bit of extra income which
he can regars as 'wages' for being a 'collector of taxes'!
.
- References:
- VAT Threshold & Help Required
- From: smokey
- Re: VAT Threshold & Help Required
- From: tim.....
- VAT Threshold & Help Required
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