Vat?

[Titanium Trades]

Can someone please explain the basics of VAT. I will not be VAT registered as i know the threshold is +77k. So as a sole trader, I buy from a Merchant...is their price incl.VAT? What do i charge the customer for materials if iv'e paid the VAT at the Merchant? And if my hour rate is (for example) £40...do i then add 20% ontop of that? VAT is a minefield to me 🙁 Thanks for any help. Oh and i've been busy in Afghanistan (Army) and now want to be self employed so did'nt really give a **** about VAT beforhand as you can imagine.

 

[Dannypipe]

You just charge the cost of the materials (including the VAT) to the client. Plus any profit you may wish to make.

If you were VAT registered, you would also charge VAT on your labour, but would be able to claim VAT back on materials.

If your turnover is under the threshold just don't sweat it. You don't need to mention VAT in your quotes/invoices until you reach that threshold.

 

[Simon F]

if your not vat registered, why would you be charging it to the customer?
what you charge for the materials is up to you, do you want to make a mark up or supply at cost and just charge for labour?
its your call.
just keep your total income below the threshold and then you don't need to do anything.

 

[JAP&H]

If you buy a pump from merchant, you don't sell it to your customer vat free, you cover your cost (+ any mark up)

Do not add vat to labour unless your vat registered, HMRC don't like it.

My invoices show item cost, vat rate, vat and total for all customers. I put a vat rate of zero on labour.

The average home owner isn't interested but when subbing for firms who are vat registered they want everything laid out.

 

[Nostrum]

If you buy a pump from merchant, you don't sell it to your customer vat free, you cover your cost (+ any mark up)

Do not add vat to labour unless your vat registered, HMRC don't like it.

My invoices show item cost, vat rate, vat and total for all customers. I put a vat rate of zero on labour.

The average home owner isn't interested but when subbing for firms who are vat registered they want everything laid out.

How do you get away with charging 0% VAT on labour?

 

[snowhead]

How do you get away with charging 0% VAT on labour?

He's not VAT registered, he's just showing the VAT he's paid.

 

[Nostrum]

OK misread that, but if your dealing with another VAT registered company they can't claim the vat back through you anyway, you will pay it.

 

[anz]

If you buy a pump from merchant, you don't sell it to your customer vat free, you cover your cost (+ any mark up)

Do not add vat to labour unless your vat registered, HMRC don't like it.

My invoices show item cost, vat rate, vat and total for all customers. I put a vat rate of zero on labour.

The average home owner isn't interested but when subbing for firms who are vat registered they want everything laid out.

Your doing it wrong.

If you buy a pump from merchant for £20 + VAT (total £24)

Your then reselling to your customer, for £24. You can't put on your invoice £20 + VAT because your not VAT registered.

The VAT you paid, you cover from the price you sell to your customer but you can't label it as VAT.

Make sense?

 

[hammers4spanner]

If ever you go over threshold just open up another company ,problem solved!

 

[JAP&H]

As snowhead posted I show what I have paid for materials etc.

If customers buys direct from merchant they get the same on their flimsy.

I have invoiced landlords, housing associations, builders etc and been asked for the invoice to be re-submitted showing VAT on materials.

Resulted in delays getting paid, so now show what I have paid, but do not claim anything back.

 

[street elbow]

Hi, Having been VAT registered and now no longer registered, I have invoiced as registered and non registered,

If you are registered, buy your materials at say £100.00 plus VAT at 20% = £120.00 cost price.

Fit the part, charge Labour at £100.00 plus VAT.

want 20% profit on materials, £100.00 + 25% profit = £125.00.

Total sales invoice price,

labour £100.00
materials £125.00
Sub total £225.00
VAT @ 20% £ 45.00
Total Due £270.00

If you are not registered,

Materials at cost price of £120.00

Labour at £100.00

want 20% profit on materials in this case £120.00 + 25% = £156.25


Invoice as follows:

Materials £156.25
Labour £100.00
Total Due £256.25


In the second case no vat is mentioned.
any one asking for a breakdown of vat from an un registered business is on the fiddle
and you may find you are also in trouble with HMR&C for aiding a company that is commiting fraud.

You cannot claim back vat on any part of an invoice from an unregistered supplier.

If the person you are working for does want to claim back the vat, then they have to buy the materials.

To put in simple terms, I paid my supplier for my monthly account, used personal cheque book by mistake, paid myself bock from business account, and claimed vat back on next return. was told by VAT inspector on his visit "cannot claim back the vat as it was supplied by an un registered supplier."

Beware the vatman / woman.

David

 

[Nostrum]

I agree,

As I see it you are mentioning VAT on an invoice. An invoice is a list of your charges, therefore by putting VAT down you are suggesting that they are paying the VAT. Whilst it's true to some degree, you have already paid the VAT and as you are not VAT registered, you are unable to charge or pass the VAT on any further in the chain so to speak so you just have to adjust your material price to cover the cost of the VAT you have already paid.

Your invoice should have no mention of VAT on as it is misleading. By issuing an invoice with 0% VAT it could be interpreted that the good/service you are selling is eligible for the 0% VAT (some food for example has a 0% VAT rate even if you are VAT registered)

There is no advantage with adding VAT to an invoice as unless you have a VAT registration number the recipient of the invoice cannot legally claim it back. What would be even worse, would be adding your mark up onto the invoice pre-vat and then calculating it's equivalent VAT value, you will be in serious trouble if you are caught doing this.