Outsourcing to VAT-reg'd companies

[Russinating]

I know there's a few accountants/tax people out there (von? ) who might be able to help me with my small problem. It should be fairly simple but I can't work out the best way of going about it.

Client = VAT registered
We = Not VAT registered, and need to outsource a small amount of work (printing)
Supplier (Printers) = VAT registered

My pickle is how to make a small margin on the printing while dealing with VAT. As an example:

Printing costs £1,000 exclusive of VAT. If I add a 10% margin onto this, and give our client a quote of £1,100 plus VAT on this element, then they'll be paying VAT on the £100 which shouldn't be the case. If I give them a quote of £1,275 (quote plus VAT plus margin) then they won't be able to claim their VAT back.

Obviously I don't want them to know what the margin is, so what's the best way to do this? It seems like giving them a VAT-exclusive quote which includes our margin seems the best way for them, but then what do we do with the 17.5% of our margin? Pocket it and keep quiet or... burn it?

Thanks in advance.

PS. In before the "just don't add on a margin?" brigade. This is just an example: some of our work requires a margin because our service is purely as a middle-man, so while I could be less greedy with this particular example I also need to know for the future generally.

 

[TheBigCheese]

I'm not sure I am reading your post correctly (I have read it a couple of times but I'm tired).

I don't understand why you are saying £1100 to your client + VAT.

You aren't VAT registered so you can't charge VAT. If you did your client would ask for a VAT receipt - which includes your VAT number so they can claim back the 17.5%.

Remember that money isn't yours, you are collecting it on behalf of the government so there isn't any margain to be made on it.

Supplier -> you.
They charge you VAT - you pay the VAT on the order making the government money.

That transaction is completed.

You -> client
You charge whatever you paid the printers + your margain.
The client pays you for services rendered and goes away happy. You tell them that prices are exclusive of VAT as you aren't registered.

That's it as far as I can see. Sorry if I've misinterpreted!

 

[blade007]

can't charge VAT if not VAT registered.

So the only thing you can do is pay the printers the £1000+175. Then add your 100. Charge your customer the full £1275 and they can't claim the VAT back .. that's just the price.

You make £100

 

[mollymoo]

You can't charge vat if your not vat registered likewise you cant claim vat, so your printer suppliers vat you cant claim and you can't charge it, also you can't give a vat reciept so your client can't claim it back.

For future reference it's sometimes a good idea if most of your clients are vat registered to volutarily register yourselves for vat (regardless of whether or not your under the threshold of turnover which I think is £67,000 at the moment) as you can then give them vat reciepts which attracts clients and in the case of one of my clients actually make on your vat.

Get a good bookkeeper they are worth their weight in gold.

 

[Dark88]

It's up at 68K at the mo.
If you register for VAT you'll be able to reclaim your input VAT too. Only thing to weigh up is whether the extra admin is worth the money.

 

[meghatronic]

Pretty good advice already, but just add your margin to whatever the inc VAT price is with your suppliers, as you can't charge VAT.

 

[Dark88]

Pretty good advice already, but just add your margin to whatever the inc VAT price is with your suppliers, as you can't charge VAT.

But then of course the client won't be able to reclaim the portion of VAT that is in the price via the supplier. No way to get around that though.

 

[blade007]

But then of course the client won't be able to reclaim the portion of VAT that is in the price via the supplier. No way to get around that though.

If mainly you're selling to VAT registered companies then it helps to be VAT registered.

It also adds a bit of credibility to the company.

 

[Jambo]

It sounds to me like you are acting as an agent so I think this means you can't mark up the price. You should have an arrangement to invoice the supplier for commission. Have you discussed with them how they deal with this?

I think the only alternative is treating it like a normal purchase and sale where you will need to pay the VAT to the supplier and not charge it to your customer, which as has been pointed out isn't a great way of doing it, you might be better voluntarily registering for VAT.

I would suggest speaking with the supplier and HMRC for clarification.

 

[csmager]

It sounds to me like you are acting as an agent so I think this means you can't mark up the price. You should have an arrangement to invoice the supplier for commission. Have you discussed with them how they deal with this?

Either way, he can't charge VAT as he's not VAT registered. The only way that could work is if the ultimate supplier invoiced the client, which I doubt the OP wants to do.

 

[Jambo]

Either way, he can't charge VAT as he's not VAT registered. The only way that could work is if the ultimate supplier invoiced the client, which I doubt the OP wants to do.

He might if that is how they work. If the printer only offers print through resellers for example then it isn't really an issue and it means the end customer can reclaim their VAT and the agent doesn't have to register for VAT. I believe the agent can still handle the payment as well.

It's worth getting professional advice on.

 

[csmager]

He might if that is how they work. If the printer only offers print through resellers for example then it isn't really an issue and it means the end customer can reclaim their VAT and the agent doesn't have to register for VAT. I believe the agent can still handle the payment as well.

It's worth getting professional advice on.

Oh, for sure - if that's how the operate.

Don't think it's worth getting any professional advice, just advice from the supplier (or some more knowledge about the supplier!).