VAT Wondering what i would need to do?

[samhorne]

i was wondering if i had to pay VAT twice here is the story :

If i started a bussiness and say i brought an item for �10 and that was including 15% VAT and then i wished to put it on my shop shelves and sell it for �15 would i have to pay VAT on the �15 ?

[Rollo]

It depends on whether you are a "VAT registered trader/business"

If you are registered then you charge your customers VAT on their purchases, but you offset against this the VAT you paid when you bought it, and then pay the difference to HMRC.

If you are not VAT registered then you can't charge your customers VAT on their purchases, and you therefore have to absorb any VAT you paid when you bought the item into your costs/overheads because there is nothing to offset it against

[samhorne]

So i would have to do this:
if i was registered for VAT

VAT included on �10 is �1.50
VAT included on �15 is �2.25

so i would keep all related docs proving these amounts then i would pay the difference bewteen �1.50 and �2.25 which would be �0.75

Correct?

[mccfluff]

yep

[Rollo]

In a nutshell - yes, that's fundamentally how it works

But the VAT rules are complex and you need to understand them, or employ an accountant.

[Skyline D]

Except that the VAT INCLUDED in �10 is actually �1.30. The VAT ADDED to �10 if �10 is the price before VAT would be �1.50.

Likewise, if you are selling an item at �15 on the shelf the VAT included thereon is �1.96, not �2.25. If you were selling an item for �17.25 it would have �2.25 of VAT in it.

All presuming of course that whatever the "item" actually is is a VATable supply and not something with 0% VAT or exempt.

[buildersmate]

... or even VAT rated at 5% (yes there are some)

[Skyline D]

Yes, domestic fuel items, not the sort of thing he's likely to "sell on a shelf" so I ignored it.