Business VAT question

[Over Clocker]

Hi guys,

Quick question:

Use the following scenario:

Business A buys 40 PCs for £400+VAT ea. The purhase of the purchase is to sell them to business B for £450+VAT.

Business A gets an invoice for 40x400+vat. Business A invoices business B for 40x450=vat.

What does business A do regarding the VAT paid when it comes to tax assesment? I know we don't claim, as we've sold the products on, but what needs to be declared etc etc.

Cheers for any help or pointers.

Mal

 

[Visage]

Hi guys,

Quick question:

Use the following scenario:

Business A buys 40 PCs for £400+VAT ea. The purhase of the purchase is to sell them to business B for £450+VAT.

Business A gets an invoice for 40x400+vat. Business A invoices business B for 40x450=vat.

What does business A do regarding the VAT paid when it comes to tax assesment? I know we don't claim, as we've sold the products on, but what needs to be declared etc etc.

Cheers for any help or pointers.

Mal

Business A will owe the government 17.5% of £(450-400) for each unit sold on.

i.e 350 quid.

 

[csmager]

Surely you claim the VAT back on the purchase, and you charge VAT on the sale.

These all add up, and at the end of the month you put in total in the relevant box on the return.

Box 1/2/3 has the amount of VAT you owe (i.e. the amount you've charged on your sales)

Box 4 has the amount of VAT you're reclaiming (i.e. the amount you've had to pay on your purchases)

Box 5 has the difference between the two - this is either what you owe Customs or what they owe you.

 

[Over Clocker]

Thanks mate, that's the bit I wasn't sure about.

So we claim back the VAT on our purchase, and we owe the VAT on the sale. So basically, for example, we give them £2800 and they give us £2800?

Cheers,

Mal

 

[Paul11]

£400 x 40 = 16000 VAT = 2800

£450 x 40 = 18000 VAT = 3150


3150 - 2800 = £ 350 you owe the VAT man

 

[csmager]

Thanks mate, that's the bit I wasn't sure about.

So we claim back the VAT on our purchase, and we owe the VAT on the sale. So basically, for example, we give them £2800 and they give us £2800?

Providing you're VAT registerd, then yes.

You tot them all up and the end of the month and put on the return what you owe them and they owe you, and one of you writes a cheque for the difference. In this case, you'd owe them money as you're charging more VAT then you claim back (if all you sell are these computers!)

They always owe us money, as being housebuilders we claim all the VAT back on the stuff we buy, but there's no VAT chargeable on selling houses...

 

[Simmy]

You buy the computer at £400 + £70vat
Sell them on at £450 + £78.75 vat.
You can claim back the original £70 vat I think, but you owe the tax man the difference, so £78.75-£70=£8.75?

That's how I always thought it worked, but I'm not VAT registered so I can't be sure

 

[Jambo]

Is this hypothetical or a real life question? If it's real life, why do you not know how to deal with VAT, have you just registered?

You should probably seek professional advice as VAT is not always straight forward. For example, you do not mention where the computers were purchased from. If it was outside the UK then different rules apply.

 

[atpbx]

You buy the computer at £400 + £70vat
Sell them on at £450 + £78.75 vat.
You can claim back the original £70 vat I think, but you owe the tax man the difference, so £78.75-£70=£8.75?

That's how I always thought it worked, but I'm not VAT registered so I can't be sure

Thats exactly how it works.

You also claim back everything else you have been charged VAT on in pursuit of you business.