Confused!!!

[proequip]

Hi all, hoping someone can help, I'm a sole trader and VAT registered. I buy goods from a Spanish company and pay their UK sales team, the goods come from Spain with no VAT.

I add the 20% VAT when I sell on the goods and then pay HMRC that money, get all that bit, but I'm losing money on some deals... Am I missing a link here? Should I be claiming something back??

Example...

I buy item A for £10 no VAT,

Sell for £12 including VAT, pay £2.40 back to HMRC....

Is it just a case of I need bigger margins to make profit?

[absolutevat]

When the goods come from the Spanish supplier with no VAT, you are responsible for declaring UK acquisition tax in box 2 on the return. If the goods are standard rated when sold in the UK, this amount will be 20% on the value of the purchase (i.e. £2 on a £10 purchase). The same amount can be recovered as input tax in box 4 of the VAT return.

You then charge VAT on the sale as applicable.

[section 44]

Is it just a case of I need bigger margins to make profit?

Yes

[spidersong]

You also need to be sure of your calculations and when you mean inclusive or exclusive:
"Sell for £12 including VAT, pay £2.40 back to HMRC"

If you're selling for £12 inclusive then the VAT would be £2 (£10 net plus £2 VAT) and you'd make nil profit
If you're selling for £12 exclusive then it's £2.40 VAT with a £14.40 gross (VAT inclusive) price, and you'd make a £2 profit.