HELP!! VAT QUERY?????????

Lmnover

Hi

I have a realatively new business (1 year old) that sells furniture which I mainly buy from the uk and northern ireland.

When I do my VAT return; my vat on purchases in always very low in comparision to my Vat on sales - the furniture is bought in at zero rate vat so my accountant has said I cant include these purchases in my figure to reduce the VAT that I pay. But I then I pay the revenue 21% of each sale when I sell the furniture on.

I have since talked to someone else in the car business who has said that they have the same process ie buying in north - selling in the south but that they are allowed to offset/remove the Uk vat and that they pay VAT on the profit only. which means that last year with the uk VAT rate of 17% they were only losing 4% (ie the difference between the VAT rates)

I would appreciate any advice possible as my VAT bills are huge and I am starting to think that there is something badly wrong!

Alan Shore

Well,

Don't mind the car example for a minute as there are special rules for car dealers.

Furniture Sales.
Your purchases are zero rated as they are intra EU acquisitons. So you do not pay VAT to the supplier in the North / UK.
As you do not pay VAT you can not claim any VAT.
You should self account for the notional VAT by adding it to your sales VAT and purchase VAT figures.

If you take an example.
Irish sales at 21% = 121,000 VAT 21,000
UK purchases at 0% 80,000 VAT 0
Pay to Collector Gen 21,000

If you were to buy the furniture in Ireland:
Irish sales at 21% = 121,000 VAT 21,000
Irish purchases at 21% 96,800 VAT 16,800
Pay to Revenue 4,200
And you have to pay an extra 16800 to the supplier.
The position is the same except you pay a different person.

Clanket

+1 for what Alan said. Different rules for car business.

And because you dont pay VAT on your purchases, you cannot claim any input VAT on your furniture purchases from the the UK and Northern Ireland.

So when setting your selling price you need to use the following:

Cost price + Mark-up (the profit you want on each item sold) + VAT = Selling Price.

You will be able to claim VAT back on any vatable expenses you incur such as telephone, electricity, phone bills etc etc.

barneystinson

Totally agree with the two previous replies, and can I just suggest you make sure you take on board the importance of filling out the figures on the VAT return correctly, ie adding on the notional VAT on the EU purchases to both your VAT on Sales and VAT on Purchases.

By failing to do so you increase the likelihood of a VAT audit, as Revenue's systems will pick up on the fact that you are buying in a lot of stuff from the EU on your VAT number, but that it isn't being reflected in your VAT returns...

Saint Sonner

Thought I'd ask my own VAT query in this thread:

This is the scenario:


A shop is selling Kerosene off the pump - the vat rate should be 5% (UK) however it has been noticed after approx 3 years this has been being charged at 17.5% the whole time. It is also being paid over to HMRC at 17.5% . Therefore I am taking it that no liability is owed from HMRC as you have paid them VAT that wasn't really yours in the first place. However where does the liability rest? Customers have obviously been charged too much VAT on their purchase but how do you reimburse such small value - large quantity purchases from anonymous consumers????

ssbob

Saint Sonner wrote: »

Thought I'd ask my own VAT query in this thread:

This is the scenario:


A shop is selling Kerosene off the pump - the vat rate should be 5% (UK) however it has been noticed after approx 3 years this has been being charged at 17.5% the whole time. It is also being paid over to HMRC at 17.5% . Therefore I am taking it that no liability is owed from HMRC as you have paid them VAT that wasn't really yours in the first place. However where does the liability rest? Customers have obviously been charged too much VAT on their purchase but how do you reimburse such small value - large quantity purchases from anonymous consumers????

If you knew the customers then you could issue them with a credit note whcih would entitle you to claim that VAT back from HMRC, however as you do not know who the customers are then I would say you need to correct the situation going forward and note it in case of a VAT audit, you will not be penalised for this by HMRC.

misspiggy40

Well done Alan on a really user friendly reply.