Q:
Hi Everyone.
I currently sell things on the internet as a small money making plan alongside my full time job.
I am looking to sign up to major suppliers and to do so it is required I am VAT registered to purchase wholesale products from these companies.
On their websites it excludes VAT in the prices. Does this mean I have to charge VAT myself on top of what I sell to my customers?
I would really appreciate some VAT advice on what I have to pay etc. Could anyone email me with some advice?
Thanks!
Alex
A:
Hi Alex
Sounds like you’re a real newbie to VAT so welcome to the club!
In principle if you register for VAT, then you can claim VAT that is charged to you by your suppliers and you charge VAT on top of your net price to your customers. Then you pay the difference to HMRC.
That’s basically how it works but there are all sorts of rules and exceptions to rules so you need to read up on it a bit more. For example, your supplies (sales) could be one of the limited categories that is zero-rated – eg printed matter – so in that case you wouldn’t need to charge VAT to your customers. In other cases you aren’t allowed to claim VAT that you pay to your suppliers. It all depends on the nature of your business activities.
It is a complex subject and you need to make sure that you understand the basic rules properly. Can I suggest that you download a copy of my “Beginner’s Guide to VAT” and start with this as it’s a short introduction to the subject designed for people who are new to the subject and it should help you understand the main principles.
Once you’ve got your head around the main principles, other help is available from HMRC. The main official sources of information are on the HMRC website, 2 particular publications are “The Ins and OUts of VAT” which is here http://tinyurl.com/33crxs5 and contains guidance about many practical VAT issues. More detailed guidance is in “The VAT Guide” which is here http://tinyurl.com/3ajbugl. “The VAT Guide” is over 100 pages long and has a lot of detailed information, so you might only want to read the first few sections to begin with.
There’s also guidance on registering for VAT called “Should I be registered for VAT?” which is here: http://tinyurl.com/396kxa.
AS you’ll see, there’s a lot to take in so put some time aside and take the phone off the hook so you have time to take it all in. Once you’ve got your head round this initial guidance, there are several other publications which explain how the VAT rules apply to specific types of business and you’ll need to check out the guidance that applies to your type of business.
That lot of reading should keep you going for a while! But if you need help with any more specific issues relating to your business, let me know and I’ll point you in the right direction. And good luck with your new business venture!
Marie