Hi this video is so helpful thank you very quick very informative. So I started a a shopify store I showed my friend my store and the first thing he said was are the prices with or without VAT. I asked my accountant and she informed me to not register until I hit a certain amount of sales which I believe was 85k. My accountant told me he can claim whole price in accounts and get the VAT back that way unless he’s buying 85k of stuff off me which he isn’t.
If you manage to find the time to reply to this comment thank you and could you please help me understand what she means by claims whole price in accounts
You would be best off asking the accountant to explain exactly what she means. You cannot charge VAT on sales unless you're VAT registered but other businesses will still charge you VAT on purchases if they are registered. If you are VAT registered you can offset what you spend on VAT vs the VAT you charge your customers. However, if you're not VAT registered, there isn't a way (that I'm aware of) to 'reclaim' the VAT you pay. However, I'm not an accountant so you'd be best off asking a trained a professional.
If you fail to register in time you are likely to incur financial penalties based on a percentage of the amount of VAT that is due. This penalty increases the later you are. More details, here: www.gov.uk/guidance/late-registration-penalty-for-vat-notice-70041
What is the obligation of a VAT registered limited company when sourcing services from sole traders not VAT registered. As their invoice will not be having VAT, no VAT to be paid . In this transaction is there any obligation for VAT on the limited company?
VAT registered businesses only need to worry about charging VAT on products and services they sell. Whether VAT is payable on purchased goods will depend on the status of the person or company selling it. If the seller is not VAT registered, no VAT will be added to the purchase price and there is no obligation on the buyer to pay VAT. However, if both the buyer and seller are VAT registered, VAT must be added and the buyer will be able to offset the amount of VAT they've paid against that what they have charged.
Hi, I want to ask, when making a transfer, for example a transfer from a bank in the US to a foreign country such as Indonesia, are we required to input the VAT code, IFM code and TAX code? I was asked to input this transaction code
This would be one to check with an accountant. If you go from being a sole trader to a limited company (or vice versa) I believe it resets. However, if you're buying an existing limited company that is already VAT registered then I suspect it doesn't.
Possibly, it depends on your circumstances. Business that pay a lot of tax on purchases may find it beneficial to register and offset it against the VAT they charge on sales. Though if you're selling to non-VAT registered customers keep in mind you'll become more expensive to them if you have to charge VAT. Being VAT-registered can also help some B2B companies where you want to look 'bigger' or more professional. We cover this in this part of our main article www.business4beginners.co.uk/vat-explained-for-dummies/#When_should_you_volunteer_for_VAT_registration
@@business4beginners Thank you for your reply! Another question in response to that, most of my customers are through eBay where I believe they automatically charge VAT on purchases. I also purchase my products in bulk from a wholesaler that I’m registered with as a sole trader, would being VAT registered be worthwhile in that context?
Do you know if we can get vat number from any page,or from our country; becomes for example if i find a cheaper vat number to charge me lesser money for every product i sell,then is better if i not order vat from Germany
I'm sorry I'm not sure I understand your question. Could you rephrase it for me please? If you're a UK company selling to UK customers and have a turnover above the threshold then you need to register for VAT and your VAT number will be provided at the time of registration.
Yes it's a good question. We already pay tax on what we earn, so why do we also pay tax on the money we spend? As with all taxes, it's a way of raising revenue for the Government. They then spend it on what they feel is worthwhile. If we didn't have VAT, the chances are the money would be raised elsewhere, perhaps though higher corporation or personal taxes, for instance.
@@business4beginners well I'd be fine with that. It seems to be a other way to apply shackles to businesses growing beyond a certain point. Same with all the beuracricy around having employees. I can't go beyond 75k turnover because I'd then have to charge customers an extra 20% where as the smaller guy can undercut me 🤨
@@rattlin9194 The VAT threshold is £85k turnover but I totally understand where you're coming from. One the plus side, having the threshold makes things simpler and cheaper when just starting out, but on the downside you're right that it is a kind of punishment for growing your business! Keep in mind that if you buy from a lot of VAT registered businesses, you can claim back the VAT you spend which can help offset that what you have to charge your customers. However, that's only a real benefit if you have a lot of VAT expenditure.
Why couldn't i have found this video before spending 40 mins watching others, simple and clear thank you!
Thanks for the kind comment, I'm glad you found the video useful!
Hi this video is so helpful thank you very quick very informative. So I started a a shopify store I showed my friend my store and the first thing he said was are the prices with or without VAT. I asked my accountant and she informed me to not register until I hit a certain amount of sales which I believe was 85k. My accountant told me he can claim whole price in accounts and get the VAT back that way unless he’s buying 85k of stuff off me which he isn’t.
If you manage to find the time to reply to this comment thank you and could you please help me understand what she means by claims whole price in accounts
You would be best off asking the accountant to explain exactly what she means. You cannot charge VAT on sales unless you're VAT registered but other businesses will still charge you VAT on purchases if they are registered. If you are VAT registered you can offset what you spend on VAT vs the VAT you charge your customers. However, if you're not VAT registered, there isn't a way (that I'm aware of) to 'reclaim' the VAT you pay. However, I'm not an accountant so you'd be best off asking a trained a professional.
What happens if you fail to register for VAT after £85,000 annual turnover?
If you fail to register in time you are likely to incur financial penalties based on a percentage of the amount of VAT that is due. This penalty increases the later you are. More details, here: www.gov.uk/guidance/late-registration-penalty-for-vat-notice-70041
You legend I thought it was exactly like you just mentioned
Thanks for the nice comment, I'm glad it confirmed a few things for you!
What is the obligation of a VAT registered limited company when sourcing services from sole traders not VAT registered. As their invoice will not be having VAT, no VAT to be paid . In this transaction is there any obligation for VAT on the limited company?
VAT registered businesses only need to worry about charging VAT on products and services they sell. Whether VAT is payable on purchased goods will depend on the status of the person or company selling it. If the seller is not VAT registered, no VAT will be added to the purchase price and there is no obligation on the buyer to pay VAT. However, if both the buyer and seller are VAT registered, VAT must be added and the buyer will be able to offset the amount of VAT they've paid against that what they have charged.
@@business4beginners Thank you so much for your prompt reply clarifying this. I like your videos.
@@hannahkris6929 Thanks, I'm glad you like them - make sure you're subscribed to get all our new videos!
Hi, I want to ask, when making a transfer, for example a transfer from a bank in the US to a foreign country such as Indonesia, are we required to input the VAT code, IFM code and TAX code? I was asked to input this transaction code
I'm not sure on this one I'm afraid, please consult with your accountant.
Does the turnover reset if I buy a trading business?
This would be one to check with an accountant. If you go from being a sole trader to a limited company (or vice versa) I believe it resets. However, if you're buying an existing limited company that is already VAT registered then I suspect it doesn't.
Would it be worth getting a VAT number even if the business doesn't have an annual turnover of 85k?
Possibly, it depends on your circumstances. Business that pay a lot of tax on purchases may find it beneficial to register and offset it against the VAT they charge on sales. Though if you're selling to non-VAT registered customers keep in mind you'll become more expensive to them if you have to charge VAT. Being VAT-registered can also help some B2B companies where you want to look 'bigger' or more professional. We cover this in this part of our main article www.business4beginners.co.uk/vat-explained-for-dummies/#When_should_you_volunteer_for_VAT_registration
@@business4beginners Thank you for your reply!
Another question in response to that, most of my customers are through eBay where I believe they automatically charge VAT on purchases.
I also purchase my products in bulk from a wholesaler that I’m registered with as a sole trader, would being VAT registered be worthwhile in that context?
@@ofordy Sorry, I can't give individual advice - you would need to speak to your accountant for that.
What about if you make less than 85,000.
VAT registration is optional if your turnover is below £85,000.
@@business4beginners is there anyway we can be exempt from importing good (clothes) for resell from china to UK
@@Saynofficial. Not sure on that I'm afraid. You'd need to consult with an accountant or tax advisor.
Do you know if we can get vat number from any page,or from our country; becomes for example if i find a cheaper vat number to charge me lesser money for every product i sell,then is better if i not order vat from Germany
I'm sorry I'm not sure I understand your question. Could you rephrase it for me please? If you're a UK company selling to UK customers and have a turnover above the threshold then you need to register for VAT and your VAT number will be provided at the time of registration.
loved your video
Thank you, I'm pleased you found it useful! Make sure to subscribe to our channel!
I'm trying to understand Why we have VAT?
Yes it's a good question. We already pay tax on what we earn, so why do we also pay tax on the money we spend? As with all taxes, it's a way of raising revenue for the Government. They then spend it on what they feel is worthwhile. If we didn't have VAT, the chances are the money would be raised elsewhere, perhaps though higher corporation or personal taxes, for instance.
@@business4beginners well I'd be fine with that. It seems to be a other way to apply shackles to businesses growing beyond a certain point. Same with all the beuracricy around having employees. I can't go beyond 75k turnover because I'd then have to charge customers an extra 20% where as the smaller guy can undercut me 🤨
@@rattlin9194 The VAT threshold is £85k turnover but I totally understand where you're coming from. One the plus side, having the threshold makes things simpler and cheaper when just starting out, but on the downside you're right that it is a kind of punishment for growing your business! Keep in mind that if you buy from a lot of VAT registered businesses, you can claim back the VAT you spend which can help offset that what you have to charge your customers. However, that's only a real benefit if you have a lot of VAT expenditure.
📌 FULL GUIDE: www.business4beginners.co.uk/vat-explained-for-dummies/
Other Resources:
Postponed VAT Accounting: www.business4beginners.co.uk/what-is-postponed-vat-accounting/
Recommended Accountants: www.business4beginners.co.uk/best-online-accountant-reviews-uk/
VAT Registration: www.gov.uk/vat-registration
brill
Thanks, glad you liked it!