To VAT or not to VAT

coolmoose

Hi all,

first post on this forum. recently set up a web and document design and print company. i import goods from elsewhere in the Eu and the company i use charge me VAT at standard Irish rate of 21%.

i know i wont reach the VAT threshold for a while, but would it be worth my while registering so i can claim back? i'm already charging customers VAT, but if i register, can i claim back VAT on purchases made elsewhere in the EU? how long would it take an accountant to do VAT returns annually? how much would an accountant normally charge for this service?

i know revenue have guides on this stuff but from reading some of them i might as well be looking at a donkeys arse.

any help would be much appreciated! thanks!

karangka

Hi,

First of all. Congratulations on your new business.

You can't charge VAT if you are not registered for VAT! You have to stop doing that and refund the VAT you've collected.

You can claim purchase VAT from an Irish company if you are VAT registered. I am not too sure about the position with claiming VAT from other EU states. Perhaps someone can clarify this.

If your VAT liability is less than €3,000 annually, you can opt for semi-annual VAT returns. The cost of doing a VAT return depends on the volume of transactions, quality of record keeping, timing in dropping in materials and complexity of the business.

spaceballs

Without knowing the details it seems that the company you are purchasing from are in fact registered for VAT in Ireland otherwise they wouldn't be charging you VAT at the Irish rate but at their local rate. Therefore if you register for Vat you should be able to simply claim the vat back on the purchase from what I can tell.

If it is not the case that they are registered in Ireland the rules is basically the intra-community purchase of goods from a Vat registered person/company from another EU country is deemed to take place where the goods are when the transportation ends. When purchasing the goods you could simply supply them with you Irish Vat registration number for inclusion on their Vat invoice. This will enable the goods to be zero rated in the other EU country (The supplier must have evidence that the goods are leaving the country). Then on acquiring the goods you are required to self account for Vat at the rate appropriate to the goods on your own Vat return. This means that you include the Vat on the goods in both the Vat on sales and Vat on Purchases sections of your Vat return therefore not actually effecting your Vat liability.

An example of this would be say you make a purchase of €1,000 net of Vat. At the moment you are being charged €1,210 by the supplier. If you give them your Vat registration number they will not have to charge you vat and therefore you will only pay them €1,000. Then when you receive the goods a supply of goods has taken place and you will need to return the relevant Vat to the revenue, ie. adding €210 to your Vat on Sales for that period. However as you are using the goods for the purpose of your trade you can also claim the Vat on the Purchase of €210 back, resulting in the goods only costing you €1,000.

Even though it seems pointless including the Vat on your Vat return as it doesn't effect your liability the revenue don't look at it this way and could charge penalties if they found out that it was omitted.

Also, what Karangka said, you cannot charge Vat if you are not Vat registered so you should either refund the Vat to your customers or register for Vat and issue valid Vat invoices (stating your Vat number) to the customers. I would say that seeming as your customers appear to already being willing to pay Vat it would probably be worth your while just registering for VAT.

As for Vat returns, they are not actually that complicated and if you know any accountant that you could sit down with for an hour or two and run through the basics then it wouldn't be too hard to do them on your own. If you're not too confident about doing the returns yourself a way to cut back on costs may be to estimate your monthly Vat liability and sign up for a direct debit Vat payments option. This way you pay a direct debit every month and then at the end of your accounting year you prepare an annual Vat return therefore cuting back on the amount of work you need to do during the year. You could then prepare a draft Vat Return and ask an accountant to review your workings. This way you get the assurance that an accountant considers the return is correct without having to pay him to prepare it. It would depend on the level of transactions involved but I can't imagine that an accountant would charge too much to simply review a return. Say a few hundred €.

coolmoose

whoops, thanks for the heads up on that one lads! assumed i had to charge VAT but couldn't claim back! put a stop to charging VAT and refunded customers until im registered.

i would assume its worth my while registering for VAT as its mostly businesses i deal with, therefore VAT registration benefits us both really.


the company i use are registered in ireland for VAT, checked with them, they just ship from another eu state. so off to fill out form to register for VAT methinks. didnt think of doing the returns myself and getting accountant to check them!

thanks for the advice!

information

coolmoose wrote:

assumed i had to charge VAT but couldn't claim back!

What where you going to do with the vat?

coolmoose wrote:

i would assume its worth my while registering for VAT as its mostly businesses i deal with, therefore VAT registration benefits us both really.

Vat registration dosen't benefit any business(excluding accountants), its only a method of collecting tax for the government.

kluivert

To regsiter or not depends soley on two factors.

1. Obviously, whether or not you like you will be above the threshold limit of €55000, this will increase next year in 2007.

2. Are you customers mainly regsitered for Vat.

If yes to point 2 then you consider consider regsitering for Vat as you are not passing the Vat charge onto the end customer. That will be done by your customer, as they will claim the vat back on your invoice

In addition to this you will be able to claim back to Vat on your inputs or purchases.

If you find that most of your customers are not registered by Vat and you are well below the threshold, ie about 5-10k in revenue, then I would not regsiter for vat, this will allow charge a cheaper price to the end user or customer as the prices doesnt include Vat.

Good luck on your business, I am fimiliar with that particular thing of business and can prove very successful.

Tourist maps and brouchures, like you find in hotels can be a big seller. Advertise throughout Ireland and the UK.

coolmoose

information wrote:

What where you going to do with the vat?

I assumed it would be handed over to revenue at the end of the year. the vat guides kinda confusing!

dont know what income for the first year will be but i would imagine a good bit less than the 55k mark! most of my customers are businesses, quite a few would be VAT registered so ill keep an eye on things and register if needed.

thanks for all the help.

Relaxationtank

Hi there,
Let's say I import products from abroad and pay vat but all my customers are private individuals i.e not vat registered.
Do I charge the customer vat if I'm registered for vat?

Regards,
Rory

Howjoe1

Relaxationtank wrote: »

Hi there,
Let's say I import products from abroad and pay vat but all my customers are private individuals i.e not vat registered.
Do I charge the customer vat if I'm registered for vat?

Regards,
Rory

if registered ..yes.

rate? depends on what you supply.

threshold limits will determine if you are obliged to register