VAT on Disbursements.

[si0795]

Hi im registered to VAT on a voluntarily bases, as i am earning below the threshold of £70,000. Basically i had to register for VAT as my suppliers in France required a VAT number in order for me to buy products from them excluding the VAT Rate, So now when i buy an product from my suppliers its 19.6% below the actual price so i can actually make a profit on each item.

So now when i fill in my VAT returns just what i do include in the VAT section for buying the products from my suppliers?

And do i still charge VAT to my customers considering that i dont pay VAT to my suppliers?

I am also selling my products through 'disbursements', i do not own any initial stock but pass on orders from customers directly to the supplier in France. And in terms of 'What i owe', Just How much VAT do i have do i have to pay to HMRC and still make a profit?

Remember i do not own any initial stock my income is basically the profits of every products that a customers buys.

[section 44]

do i still charge VAT to my customers considering that i dont pay VAT to my suppliers?

Yes. You are registered for VAT and therefore you must account to HMRC for VAT on your taxable supplies.

I am also selling my products through 'disbursements'

What does this mean?

Remember i do not own any initial stock

But yet:

to buy products from

?

[saharwood]

Hello

Important: please read this asap (section 7):

http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?_nfpb=true&_pageLabel=pageVAT_ShowContent&id=HMCE_CL_000152&propertyType=document

Goods you buy (whether physically received or not) you must self-charge yourself VAT (acquisition tax). Your onward supply is then subject to UK VAT (presuming they're to UK persons).

I presume you pay the supplier direct thus they're your goods (irrespective if you put the 'customer' down as the delivery address)?

Regards

[Generix]

Hmmm....this sounds like some sort of convoluted EU dropshipper arrangement.

Can you explain your supply chain?

Are you supplying goods or services?

Who is your supplier, where are they based?

Who are your customers, where are they based?

Are goods moving between territories?

[si0795]

Hmmm....this sounds like some sort of convoluted EU dropshipper arrangement.

Can you explain your supply chain?

Are you supplying goods or services?

Who is your supplier, where are they based?

Who are your customers, where are they based?

Are goods moving between territories?

Yes its a dropshipper agreement. I am supplying Goods (Consumer Electronics) from a company based in Frace. My Customers are based in the UK. I suppose the products are shipped from France but they may have warehouses located in the UK as they are a established supplier supplying thier goods to other big established retailers such as Currys and Dixons.

Im not an accountant so this area is very confusing for me. I really dont know how much i will have owe HMRC at the end of every VAT accounting period. And just to clarify im using the standard scheme of accounting. I read somewhere that i will have to owe the "net difference from my Input vat tax to my output vat tax". Again im not an accountant so my knowledge in this area is unclear.

[si0795]

[quote="Generix":1n21e4dr]Hmmm....this sounds like some sort of convoluted EU dropshipper arrangement.

Can you explain your supply chain?

Are you supplying goods or services?

Who is your supplier, where are they based?

Who are your customers, where are they based?

Are goods moving between territories?[/quote:1n21e4dr]

Yes its a dropshipper agreement. I am supplying Goods (Consumer Electronics) from a company based in Frace. My Customers are based in the UK. I suppose the products are shipped from France but they may have warehouses located in the UK as they are a established supplier supplying thier goods to other big established retailers such as Currys and Dixons.

Im not an accountant so this area is very confusing for me. I really dont know how much i will have owe HMRC at the end of every VAT accounting period. And just to clarify im using the standard scheme of accounting. I read somewhere that i will have to owe the "net difference from my Input vat tax to my output vat tax". Again im not an accountant so my knowledge in this area is unclear.

[Generix]

Ok generally dropshipping arrangements take one of two forms, both have the same VAT accounting treatment so I won't bore you with the technical mumbo of the differences, also I'll explain some basics as your last post seemed to make it clear you VAT knowledge is low (no offence).

Once you get a chance you should read this;

http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?_nfpb=true&_pageLabel=pageVAT_ShowContent&id=HMCE_CL_000152&propertyType=document

As you are making UK>UK sales at the moment your business is fairly simple and you should be able to handle the VAT yourself, or any basic accountant should be able to handle the VAT (I would hope). However if you begin to fulfil any significant orders or volumous smaller orders ship to be shipped out of UK then I would advise appointing an accountant or VAT adviser familiar with international trade.

Ouput VAT - the VAT you collect on your sales (on your sales invoices to your UK customers you will charge them VAT - this is your output VAT which you are effectively collecting on behalf of HMRC).

Input VAT - the VAT you are charged on your purchases (this may be recovered on your VAT return (subject to certain conditions) and it will be offset against output VAT collected).


Your purchases are intra-community purchases, under the single market, rather than the supplier charging you French VAT and forcing you to either request a VAT refund from France or alternatively VAT registering in France (or alternatively requiring the French supplier to VAT register in the UK etc)- there is an EU wide agreement that this process can be simplified by you applying a tax shift mechanism known as 'acquisition VAT', therefore the supplier charges you no VAT, and instead you have account for the output VAT on behalf of the supplier, but at the same time, can recover this as your input VAT. This results in a net nil result (as in 99% of cases the amount of VAT paid as output VAT is the same as the amount recovered as input VAT).

Therefore your VAT position at the end of each quarter is likely to be a payment to HMRC, as your purchases will be subject to acquisition VAT, resulting in no net payable/repayable amount to HMRC, however your sales to UK customers will be taxable, and you will be collecting output VAT on your sales, giving you a net payable overall. (obviously you will have some small input VAT to recover on stationary and sundry expenses etc)

Hope that helps..


If not - read VAT notice 700 and you will get an idea of how it all works.

[si0795]

Ok generally dropshipping arrangements take one of two forms, both have the same VAT accounting treatment so I won't bore you with the technical mumbo of the differences, also I'll explain some basics as your last post seemed to make it clear you VAT knowledge is low (no offence).

Once you get a chance you should read this;

http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?_nfpb=true&_pageLabel=pageVAT_ShowContent&id=HMCE_CL_000152&propertyType=document

As you are making UK>UK sales at the moment your business is fairly simple and you should be able to handle the VAT yourself, or any basic accountant should be able to handle the VAT (I would hope). However if you begin to fulfil any significant orders or volumous smaller orders ship to be shipped out of UK then I would advise appointing an accountant or VAT adviser familiar with international trade.

Ouput VAT - the VAT you collect on your sales (on your sales invoices to your UK customers you will charge them VAT - this is your output VAT which you are effectively collecting on behalf of HMRC).

Input VAT - the VAT you are charged on your purchases (this may be recovered on your VAT return (subject to certain conditions) and it will be offset against output VAT collected).


Your purchases are intra-community purchases, under the single market, rather than the supplier charging you French VAT and forcing you to either request a VAT refund from France or alternatively VAT registering in France (or alternatively requiring the French supplier to VAT register in the UK etc)- there is an EU wide agreement that this process can be simplified by you applying a tax shift mechanism known as 'acquisition VAT', therefore the supplier charges you no VAT, and instead you have account for the output VAT on behalf of the supplier, but at the same time, can recover this as your input VAT. This results in a net nil result (as in 99% of cases the amount of VAT paid as output VAT is the same as the amount recovered as input VAT).

Therefore your VAT position at the end of each quarter is likely to be a payment to HMRC, as your purchases will be subject to acquisition VAT, resulting in no net payable/repayable amount to HMRC, however your sales to UK customers will be taxable, and you will be collecting output VAT on your sales, giving you a net payable overall. (obviously you will have some small input VAT to recover on stationary and sundry expenses etc)

Hope that helps..


If not - read VAT notice 700 and you will get an idea of how it all works.

My french suppliers 'are' charging me 0% on VAT, so i suppose i owe HMRC the difference between the input tax (0%) and output tax (20%). Furthermore i still havent 'fully' grasped how this all works. To simplify my understanding of VAT here is an example of a sale to a customer:

"Customer Buys a Television from me for: £340 inc VAT (20% = £68)
Im selling on Amazon so i pay a 7% fee: £23.80 (Im sure i can reclaim this as a purchase on my tax returns)

I then buy this tv on behalf of my customer at: £392 EXC VAT (0%)
Delivery Cost is: £8.

That leaves me with a total of £8 Profit.

(Just note that im selling on Amazon who have very competitive pricing, ive calculated that most of the products my supplier sells i will be making no more then £5-£30 profits on each item that i sell)

Now do i owe HMRC £68. Therefore i cannot possibly be making any profit. Again i still haven't fully grasped the system of VAT.

[Generix]

I'm absolutely lost as to how you are calculating your profit.


Your costs are, exlcuding VAT:

Purchase of goods for resale £392
Freight £8
Commission £23.80

Total costs: £423.80
Income:
Income from sale of goods excluding VAT: £283.34

Total income £283.34

Assuming you meant that the sales price was exclusive of VAT then your total income is still only 340 and you still make a net loss.

Therefore, before even thinking about the VAT consequences you are making a loss.

Are the delivery and commission figures net or gross?

[Generix]

My french suppliers 'are' charging me 0% on VAT, so i suppose i owe HMRC the difference between the input tax (0%) and output tax (20%).

That is essentially how it works, although there are some other bits to the calculation, which confusingly won't change the end result to what you have assumed the calculation to be.

Furthermore i still havent 'fully' grasped how this all works. To simplify my understanding of VAT here is an example of a sale to a customer:

"Customer Buys a Television from me for: £340 inc VAT (20% = £68)
Im selling on Amazon so i pay a 7% fee: £23.80 (Im sure i can reclaim this as a purchase on my tax returns)

I assume you mean your corporate tax or income tax (lets call it business tax) return rather than your VAT return. I'm no expert in those taxes, but they generally work by levying tax on the PROFIT you make, subject to a certain calculation by determining what is and isn't allowable as expenses in calculating your profit. Therefore the commission, if allowable, would reduce your profit for the purposes of this calculation.

If you mean claimable on your VAT return, only VAT is recoverable on your VAT return, therefore you would need to determine if you were being charged VAT and hold a valid VAT invoice from the supplier to evidence the claim.

Now do i owe HMRC £68. Therefore i cannot possibly be making any profit. Again i still haven't fully grasped the system of VAT.

Ignoring that I can't make sense of your profit calculation, yes, you would owe HMRC £68, assuming there were no VAT on your purchases.

If you want to calculate how much profit you will earn or not in any given transaction. You add up all the costs and exclude UK VAT from them, as you can claim this back; this is your net cost base. In order to earn profit you must set your net selling price (i.e. price without VAT) at above the net cost base.

Trust this is clear?