Quick VAT Ques

wexfordlady

Hi all,
Just wondering if someone could confirm something for me.

A person I know buys a product up north and doesn't pay VAT and then sells it down south where they're located at vat at 13.5%.

He obvisially pays vat over on his sale and does not get vat on his purchases.. is this correct. Having a blank!!!

Thanks...

barneystinson

wexfordlady wrote: »

Hi all,
Just wondering if someone could confirm something for me.

A person I know buys a product up north and doesn't pay VAT and then sells it down south where they're located at vat at 13.5%.

He obvisially pays vat over on his sale and does not get vat on his purchases.. is this correct. Having a blank!!!

Thanks...

Yep that's right. If he provides his VAT no. to the UK vendor they will not charge him VAT, therefore he has no input VAT to claim.

wexfordlady

And he is correct to charge VAT to his customers..
So is he not loosing out then as he has less VAT on purchases.

Thanks for your quick reply..

barneystinson

wexfordlady wrote: »

And he is correct to charge VAT to his customers..
So is he not loosing out then as he has less VAT on purchases.

Thanks for your quick reply..

Sorry, I wasn't tuned in when I replied originally!

The net position is not any different, but the correct treatment is for him to "self account" for the VAT on the UK purchases.

This means that VAT at the appropriate rate (either 13.5% or 21%) should be included in both the VAT on sales (T1) and VAT on purchases (T2) on the VAT3. Box E2 should also be completed, with the net amount of the UK purchases.

And no, he's not losing out on anything, since if he'd bought in Ireland he would have paid VAT here and would be claiming it back.

Bobby1984

He is kind of losing out, not when he buys the goods but instead when he sells them. As mentioned, no vat will be paid up north once the Vat number is given. The trader self accounts for the vat meaning that it is included at the relevant rate on the return in both sales and purchases. When the goods are sold though, the vat must be returned on the supply.

Example
Cost up north: Equivalent of €80
Selling price: €113.50
Vat which must be paid is €13.50 so the profit is €20

You must be allowed to claim a full deduction in order for the transaction of self accounting to be vat neutral (no liability). The goods must not be included in the list of Fourth Schedule Services for the above rules to apply

Clanket

Bobby1984 wrote: »

He is kind of losing out, not when he buys the goods but instead when he sells them.

Wrong choice of words. He's not losing out at all. He just has to make sure that when he's selling the goods, he makes a profit.

i.e. Selling price should be cost of goods (in UK) + profit you want = Net + Irish VAT.