Should I Register My Business For Vat?

shuffles03

Hi,

I'm in the process of setting up an eBay store. My supplier will be charging me vat on purchases. I will be below the threshold for registering for vat but should I do so to offset the vat my supplier will be charging me?

If I don't register for vat, I'll have to increase the price of my items to offset it and this will put my store at a disadvantage. If I don't increase the price of my items, my margin will be severely cut.

Is registering the best option?

Alan Shore

First off you should go and talk to an accountant a couple of hours now will stand to you in the long run.

I am assuming the your customers are private individuals.
In your example let take round figures.
Not registered
You buy your product for €10 plus vat.
You sell it at 24.60 (no VAT)

So on each item you make €12.30.

So you register
You buy your product for €10 plus vat.
You sell it at 24.60 (inc VAT)

So you make €10. It really comes down to who the customer, if they can't recover the VAT then it does not matter to them.

shuffles03

Thanks for the reply. If I absorb the cost of vat without increasing the retail price, my margin is severely hurt. With eBay, there are other fees to be added onto the cost price:

Insertion Fee: €0.25
Final Value Fee: a few per cent as well
Paypal Fee: 5%
Postage: My category has to offer free postage

I think unregistered is the way to go though as I'm below the threshold but with the added fees above, I think I should increase the retail price by the amount of vat I am charged per item.

I'll be sitting down with an accountant this morning to discuss.

lakill Farm

shuffles03 wrote: »

Thanks for the reply. If I absorb the cost of vat without increasing the retail price, my margin is severely hurt. With eBay, there are other fees to be added onto the cost price:

Insertion Fee: €0.25
Final Value Fee: a few per cent as well
Paypal Fee: 5%
Postage: My category has to offer free postage

I think unregistered is the way to go though as I'm below the threshold but with the added fees above, I think I should increase the retail price by the amount of vat I am charged per item.

I'll be sitting down with an accountant this morning to discuss.

Your not taking into account not for resale vat.

Purchase €10 plus vat
Cost is €10 if your reclaiming the vat.
Sell for €24.60
Sell for €20 net and €4.60 to tax man less the €2.30 vat on purchase.

Now add up all other vatable expenses such as portion of BB, Light and heat, telephone, diesel to post office, courier etc etc

3 online clients - 2 vat reg, 1 not.