Most effective VAT schemes

[Jambo55]

Hi All,

A business (Sole trader) is currently turning over circa £110k, making extremely small profit margins, now looking at VAT registration due to exceeding the threshold, which effectively is going to make the business cash negative due to the tiny profits - is there a particular VAT scheme / approach that suits this type of business - I'm sure you've all come across a similar situation before?

Thanks,

[spidersong]

is there a particular VAT scheme / approach that suits this type of business

What type of business? Without knowing whether we're dealing with an undertaker or an astronaut or something in between, there's no way of knowing what will work. What's the mix of supplies? If they're turning over £110K but are only now looking at registering then presumably there's alot of exempt stuff there or they should've been registered earlier, or is the £110K the projected turnover for the first year?

Is there lots of Input tax that can be claimed, or is it labour intensive and mainly wages expenditure? Does it deal with the EU, or exports? Is it Business to Business or does it deal with the public? Do they deal in secondhand goods? Manufacturing? Retail? Property?

The Flat rate scheme may work, moving materials purchase to main contractors may work, incorporating may work, it really all depends on what they do and how they do it.

[Jambo55]

Hi,

its an online retailer, selling prods purchased from China to UK customers, its home based so very little other costs, some postage which is exempt. I've looked at the Flat rate scheme, but still generates a high VAT liability. Are there any margin schemes available that can be used when purchasing / reselling new goods? This would be ideal as the GP's are low? Any ideas much appreciated, thank you

[Generix]

Hi,

its an online retailer, selling prods purchased from China to UK customers, its home based so very little other costs, some postage which is exempt. I've looked at the Flat rate scheme, but still generates a high VAT liability. Are there any margin schemes available that can be used when purchasing / reselling new goods? This would be ideal as the GP's are low? Any ideas much appreciated, thank you

Pretty much no. It's a stupid business model if selling at such low margins that once the VAT threshold is exceeded then no profit is earned, either raise prices or look at where cost efficiencies can be made.

Is there a high Duty rate on the goods? Is Duty / import VAT even being declared on the imports, don't forget the import VAT will be recoverable once VAT registered; so you can effectively take 20% off the cost of the goods.