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Where Taxpayers and Advisers Meet

Limited compnay tax

Posts: 1
Joined: Thu Apr 07, 2016 6:34 pm
Location: Bournemouth

Limited compnay tax

Postby Mo84 » Thu Apr 07, 2016 6:47 pm

Please can somebody help me with some questions that i have about tax for limited companys. So the vat threshold is atound 80k once i exceed that how would it work in this situation. I buy a service from a small business for £100 and i resell this service for £110 my profit is of course £10 . The business i buy from is not vat registered, so when i pay my tax do i have to pay 20% of the income i.e the £110? Because that is more than my profit. Thank you in advance for your help. Any advice is welcome.

Posts: 924
Joined: Wed Aug 06, 2008 3:28 pm
Location: Loughborough

Re: Limited compnay tax

Postby jpcentral » Fri Apr 08, 2016 3:18 pm

If you only charge £110, the net result will be a loss.

You pay VAT on your sale price and reclaim any VAT charged on your purchases. In the case you described, you would actually be paying £18.33 to HMRC so your loss would be around £8.33.

The principle is that you should charge £110 + VAT - or £132 and pay £22 to HMRC.

You might be better off on the Flat Rate Scheme where I think the rate is likely to be around 10.5% of the gross. In your example, £11.55 - still a loss but not as great.

I suggest you spend a little time and money and talk to a local accountant who can help by going through VAT in greater detail.
John Perry
Central Business Services

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