Just done my 3 monthly VAT return and guess this is quite important. There will be companies out there that have had a surge in sales for the last 3 months like us (up to 5*normal sales). Even if people were in the £65,000 mark they might find the yearly total will go over the £85,000 threshold because of the increased sales. People need to check their numbers if this is a possibility. They need to either go with the flow and get vat registered or take the next 6 months off. Several years ago we had a retail shop and eBay was doing great. I was making too much money on ebay and too busy to register so just left it. I think in the end (after about a year of not being vat registered) we notified them that we should have been vat registered and they charged us a fine which was on a sliding scale. We got the lowest fines as we had gone to them and the accountant said this was just a mistake rather than someone trying to dodge tax. I think its the paperwork (and understanding of the figures) and making tax digital that is the put off for a lot of people, just as much as the increase in tax is. Maybe a video showing what people need to do with the figures on a vat invoice in quickbooks. ie the net price and vat. I've talked to my accountant about becoming a ltd company but he always seems hesitant. We make more money most years and he always says wait till you make some more...I don't know much of the ltd side so a video explaining it would be helpful to me.
Hi @Round Tuit, couldn't agree more, a lot of my clients and the community have had the bump in sales and are not putting on the breaks to keep below the VAT Threshold, again not saying being VAT reg is right or wrong for any business. Still, its worth at least considering for the business potential! Sorry to hear your experiences but I see it all the time, it such a common mistake but as you said it could be costly! Thanks for the Video idea on VAT filling, will put that on the list! Ltd vs S/T is also something I will look at Thanks for taking the time to comment Have a great day! Aaron
Good evening, great video, thanks for your time. I wondered if you had an opinion on how much more than 85k a year you believe you would have to make for it to be worth your time. I accept there are profitability variables, but I would personally have to see a considerable amount more in profit to feel it was worth bothering. So for example if I broke the threshold by 5 k so 90k total turnover, this would seem like a lot of headache for little reward, but 200k would make things worth your time for example. Do you have a figure in mind where you would have to see your business grow to for this to be worth the extra time, effort toward the business and administration costs?
I know this video is a few year's old but just stumbled across it looking for some info. I've just set up a small business (self assessment/sole trader) on the side of full time salaried work. I have experience doing bookkeeping for a service based business and general documentation to be compliant for VAT returns (overseen by qualified accountants), but not for products. I'm managing fine with general logging digitally but I'm stuck on how to log second hand purchases from private sellers, such as at car boot sales. There's no receipts for these kinds of purchases so how do I "prove" I made that cash purchase, for bookkeeping purposes? Am I fine to just add it as a No VAT transaction inc a detailed description without a receipt?
Hi Aaron , was wondering if you could help me. Really needing some advice. I resell exclusive trainers to the public, NOT to companies. I’m going to be hitting the threshold soon. Going to have to up the prices , but still want to be competitive , the 2nd hand margin scheme can I use this in my scenario ? Thanks
Hi Aaron, great video with some really helpful information here. I am a Shoe Reseller and buy all my shoes off individuals on marketplaces such as Ebay, Depop, Facebook etc. I have been looking at the second hand margin scheme and one of the requirements is to have the sellers name and address that you buy off. EG when you buy a pair of shoes from eBay the margin scheme requires you to have the sellers address but how do i get this information as the individual is likely to say no for privacy reasons or maybe they think its a scam etc. Just wondering if you've got any advice for this ?
You okay dropping me a message on Instagram for your prize dude, also got a friend who is interested in switching accountants with a couple questions, @theresellingwhiteboy
Good video and thanks for the info, I’m a part time reseller and have always thought about going full time but the vat has somewhat put me off, partly because of the loss in profits especially with not being able to claim back Royal Mail postage but mainly because of all the extra paperwork as I sell mainly low cost items around £10 and with the margin scheme I believe you need to do paperwork for every purchase/sale and cross reference them with sounds time consuming? and also you need to add the sellers address for each purchase you make? If this is true how would you get around this if buying from a car boot for example....any advise appreciated, cheers. Mike
HI Mikes, EBay will do all the paperwork for each sale - you turn VAT on and then eBay will generate VAT sales invoices on your behalf - VAT is tricky but if you getting to that turnover (85k) then you will in a good position to make it worthwhile by trying to push straight past the 85k mark
When calculating turnover would you include money made by other means directly relating to your business ie TH-cam revenue? Also if your partner / wife decides to join the reselling journey and uses the same lockup, equipment etc would the 2 business's be separate or would the turnover be combined? Im interested in why you never mentioned the Flat Rate Scheme. If I remember right the 2nd hand scheme is 16.6% on the profit whereas the flat rate scheme is a flat 7.5% (other retail) on turnover. So if you bought an item for £100 and sold it for £50 your profit is £50. VAT would be £8.35 on the 2nd hand scheme and £7.50 on the flat rate scheme. Im no expert of course but all the information is readily available. I would imagine if you are in a position to even consider VAT then you should be able to use a spreadsheet to work out which is best for you. Also being a Ltd Company when you get bigger is something which should really be considered, not just for the tax savings (which no doubt will change to fund the hugely unfair SEISS) but to protect your personal assets if the worst was to happen.
Hi @Jerome Taylor, It depends on your company set up, if you have an Ltd company or multiple then you can have the TH-cam and Reselling income split between different companies, as they are not the same trade. If you are a sole-trader then yes, all will be included as the same income pot and would count towards the VAT threshold, Splitting the income would be tricky as you are both in the same trade and HMRC could take the view that the income should be connected and therefore over the VAT threshold I have had the same experience happen to clients in the past, so its something you should be considered carefully As for the Flat Rate scheme, its a good shout and will bring it into play for another video, but it has its disadvantages. If you take the example of the MacBook Pro in the video If I struggle to get my top-end price and end up selling this at only a small profit to get the cash back into the business, (say I sell for £1,520 and purchased for £1,200 with £200 upgrades, I only make £120 profit) under the 2nd hand scheme I pay £20 of VAT, but if I were using flat rate scheme I would have to pay over around £110 VAT So it's a tricky one for resellers but for some niche markets it certainly worth considering. Another tick for the S/T vs Ltd Co video Thanks for your time and the comment Many thanks Aaron
@@TheQuickBooksChap its all swings and roundabouts with VAT. I would always suggest to see an accountant with all of your figures to get the best deal. I am already a Ltd company paying VAT but there are a lot of TH-camrs out there that really should be aware of their total turnover. One other thing, you did calculations of a 5 day week, I would have personally done it a 7 day week as all resellers have stock available 24/7. It would bring down daily turnover average to just over £230 before you hit the VAT threshold. If you factor in Christmas sales it is easily reached, I think a lot of people get confused because its a rolling 12 months. It wouldn't surprise me if a lot of resellers went over the threshold during lockdown, I for one had a huge upturn in turnover.
@@jerometaylor5617 I think the day thing was just an example. if you work 7 (like me) just take a bit off the 5 day....The results are just the same at the end of the year. As you said for TH-camr that its on "total" (so guess you are combining reselling and youtube) they can be separate ventures and under their own vat or no vat systems each. ie I am vat registered for my haberdashery business but if I did youtube I THINK I could either add it into my haberdashery business or not (and operate it as a totally new venture ) as it is different. I could not do that if I were to add another (similar) business like fabric as HMRC would see this as trying to avoid the VAT system.
@@mrfoameruk I think 7 days would have made it easier to understand for people. I can see why he did 5 days and to me it makes no difference as I am fully aware of VAT. I only asked about TH-cam as without reselling a reselling channel couldn't exist. How could you argue it is separate if you are recording in your office / lockup about items you bought / sold? I don't do TH-cam so have no worries but there are some out there already hitting high turnover figures and if you add on TH-cam revenue they must be close to the VAT threshold. I only know of 2 resellers who are actually VAT registered, no TH-cam reseller is (that I know of). It makes me wonder if they aren't aware of the threshold or simply exaggerate sales. Then again I wouldn't have time to make videos as well as run my business .
This has been one of the most informative videos I’ve seen on TH-cam for small businesses reselling, thank you! I learned a lot
This is the best video i've watched all month! Simplified everything! Thanks
Glad it helped!
Very informative video thanks for making this!
Glad it was helpful!
Just done my 3 monthly VAT return and guess this is quite important. There will be companies out there that have had a surge in sales for the last 3 months like us (up to 5*normal sales). Even if people were in the £65,000 mark they might find the yearly total will go over the £85,000 threshold because of the increased sales. People need to check their numbers if this is a possibility. They need to either go with the flow and get vat registered or take the next 6 months off.
Several years ago we had a retail shop and eBay was doing great. I was making too much money on ebay and too busy to register so just left it. I think in the end (after about a year of not being vat registered) we notified them that we should have been vat registered and they charged us a fine which was on a sliding scale. We got the lowest fines as we had gone to them and the accountant said this was just a mistake rather than someone trying to dodge tax.
I think its the paperwork (and understanding of the figures) and making tax digital that is the put off for a lot of people, just as much as the increase in tax is. Maybe a video showing what people need to do with the figures on a vat invoice in quickbooks. ie the net price and vat.
I've talked to my accountant about becoming a ltd company but he always seems hesitant. We make more money most years and he always says wait till you make some more...I don't know much of the ltd side so a video explaining it would be helpful to me.
Hi @Round Tuit, couldn't agree more, a lot of my clients and the community have had the bump in sales and are not putting on the breaks to keep below the VAT Threshold, again not saying being VAT reg is right or wrong for any business. Still, its worth at least considering for the business potential!
Sorry to hear your experiences but I see it all the time, it such a common mistake but as you said it could be costly!
Thanks for the Video idea on VAT filling, will put that on the list!
Ltd vs S/T is also something I will look at
Thanks for taking the time to comment
Have a great day!
Aaron
Good evening, great video, thanks for your time.
I wondered if you had an opinion on how much more than 85k a year you believe you would have to make for it to be worth your time.
I accept there are profitability variables, but I would personally have to see a considerable amount more in profit to feel it was worth bothering.
So for example if I broke the threshold by 5 k so 90k total turnover, this would seem like a lot of headache for little reward, but 200k would make things worth your time for example.
Do you have a figure in mind where you would have to see your business grow to for this to be worth the extra time, effort toward the business and administration costs?
It’s all based on the individual business, mostly on what can be claimed as input vat
I would recommend booking in some time with us ☺️
I know this video is a few year's old but just stumbled across it looking for some info. I've just set up a small business (self assessment/sole trader) on the side of full time salaried work. I have experience doing bookkeeping for a service based business and general documentation to be compliant for VAT returns (overseen by qualified accountants), but not for products. I'm managing fine with general logging digitally but I'm stuck on how to log second hand purchases from private sellers, such as at car boot sales. There's no receipts for these kinds of purchases so how do I "prove" I made that cash purchase, for bookkeeping purposes? Am I fine to just add it as a No VAT transaction inc a detailed description without a receipt?
Ebay and other selling sites will crumble. People will sell untill they get there first bill then thats it.
Hi Aaron , was wondering if you could help me. Really needing some advice. I resell exclusive trainers to the public, NOT to companies. I’m going to be hitting the threshold soon. Going to have to up the prices , but still want to be competitive , the 2nd hand margin scheme can I use this in my scenario ? Thanks
Depends how you source the trainers, are they from a 2nd hand dealers etc?
@@TheQuickBooksChap forgot to mention this!!! Sorry, Yes all are from private individuals
Hi Aaron, great video with some really helpful information here. I am a Shoe Reseller and buy all my shoes off individuals on marketplaces such as Ebay, Depop, Facebook etc. I have been looking at the second hand margin scheme and one of the requirements is to have the sellers name and address that you buy off. EG when you buy a pair of shoes from eBay the margin scheme requires you to have the sellers address but how do i get this information as the individual is likely to say no for privacy reasons or maybe they think its a scam etc. Just wondering if you've got any advice for this ?
You can use the Global Accounting scheme for this - I talk about it here: th-cam.com/video/HxjAcdHcRhs/w-d-xo.html thanks
You okay dropping me a message on Instagram for your prize dude, also got a friend who is interested in switching accountants with a couple questions, @theresellingwhiteboy
Good video and thanks for the info, I’m a part time reseller and have always thought about going full time but the vat has somewhat put me off, partly because of the loss in profits especially with not being able to claim back Royal Mail postage but mainly because of all the extra paperwork as I sell mainly low cost items around £10 and with the margin scheme I believe you need to do paperwork for every purchase/sale and cross reference them with sounds time consuming? and also you need to add the sellers address for each purchase you make? If this is true how would you get around this if buying from a car boot for example....any advise appreciated, cheers. Mike
HI Mikes, EBay will do all the paperwork for each sale - you turn VAT on and then eBay will generate VAT sales invoices on your behalf - VAT is tricky but if you getting to that turnover (85k) then you will in a good position to make it worthwhile by trying to push straight past the 85k mark
When calculating turnover would you include money made by other means directly relating to your business ie TH-cam revenue? Also if your partner / wife decides to join the reselling journey and uses the same lockup, equipment etc would the 2 business's be separate or would the turnover be combined?
Im interested in why you never mentioned the Flat Rate Scheme. If I remember right the 2nd hand scheme is 16.6% on the profit whereas the flat rate scheme is a flat 7.5% (other retail) on turnover.
So if you bought an item for £100 and sold it for £50 your profit is £50. VAT would be £8.35 on the 2nd hand scheme and £7.50 on the flat rate scheme.
Im no expert of course but all the information is readily available. I would imagine if you are in a position to even consider VAT then you should be able to use a spreadsheet to work out which is best for you.
Also being a Ltd Company when you get bigger is something which should really be considered, not just for the tax savings (which no doubt will change to fund the hugely unfair SEISS) but to protect your personal assets if the worst was to happen.
Hi @Jerome Taylor,
It depends on your company set up, if you have an Ltd company or multiple then you can have the TH-cam and Reselling income split between different companies, as they are not the same trade.
If you are a sole-trader then yes, all will be included as the same income pot and would count towards the VAT threshold,
Splitting the income would be tricky as you are both in the same trade and HMRC could take the view that the income should be connected and therefore over the VAT threshold
I have had the same experience happen to clients in the past, so its something you should be considered carefully
As for the Flat Rate scheme, its a good shout and will bring it into play for another video, but it has its disadvantages.
If you take the example of the MacBook Pro in the video
If I struggle to get my top-end price and end up selling this at only a small profit to get the cash back into the business, (say I sell for £1,520 and purchased for £1,200 with £200 upgrades, I only make £120 profit) under the 2nd hand scheme I pay £20 of VAT, but if I were using flat rate scheme I would have to pay over around £110 VAT
So it's a tricky one for resellers but for some niche markets it certainly worth considering.
Another tick for the S/T vs Ltd Co video
Thanks for your time and the comment
Many thanks
Aaron
@@TheQuickBooksChap its all swings and roundabouts with VAT. I would always suggest to see an accountant with all of your figures to get the best deal.
I am already a Ltd company paying VAT but there are a lot of TH-camrs out there that really should be aware of their total turnover.
One other thing, you did calculations of a 5 day week, I would have personally done it a 7 day week as all resellers have stock available 24/7. It would bring down daily turnover average to just over £230 before you hit the VAT threshold. If you factor in Christmas sales it is easily reached, I think a lot of people get confused because its a rolling 12 months. It wouldn't surprise me if a lot of resellers went over the threshold during lockdown, I for one had a huge upturn in turnover.
@@jerometaylor5617 I think the day thing was just an example. if you work 7 (like me) just take a bit off the 5 day....The results are just the same at the end of the year.
As you said for TH-camr that its on "total" (so guess you are combining reselling and youtube) they can be separate ventures and under their own vat or no vat systems each. ie I am vat registered for my haberdashery business but if I did youtube I THINK I could either add it into my haberdashery business or not (and operate it as a totally new venture ) as it is different. I could not do that if I were to add another (similar) business like fabric as HMRC would see this as trying to avoid the VAT system.
@@mrfoameruk I think 7 days would have made it easier to understand for people. I can see why he did 5 days and to me it makes no difference as I am fully aware of VAT.
I only asked about TH-cam as without reselling a reselling channel couldn't exist. How could you argue it is separate if you are recording in your office / lockup about items you bought / sold? I don't do TH-cam so have no worries but there are some out there already hitting high turnover figures and if you add on TH-cam revenue they must be close to the VAT threshold.
I only know of 2 resellers who are actually VAT registered, no TH-cam reseller is (that I know of). It makes me wonder if they aren't aware of the threshold or simply exaggerate sales. Then again I wouldn't have time to make videos as well as run my business .