VAT Registration

Claiming back VAT

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HI I'm looking for some advice,

Last year I set up an online store selling imported items from the USA and it looks like in the next 12 months I will hit the VAT threshold. Now I know that I have to register within 30 days of going over but I have also read that you can claim back VAT that you have paid before you registered. As I import I pay quite a lot of import VAT. If I did this would I also have to pay VAT on any sales I've made even though I havn't charged VAT?

On a similar note does anyone have any advice on increasing prices once registered for VAT, all of my customers are members of the public and raising my prices by 20% would lose me most of my customers. Another company that sells the same items as me, and from what I can tell does, at the moment, better than me as they have been trading for a lot longer doesn't charge VAT. Currently my prices are competative with theirs. 

I've worked really hard to set up this business and I'm worried VAT is going to kill it, at the moment I am not making a profit.

Thank you in advance for any help or advice given :)

Replies (6)

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Scalloway Castle
By scalloway
24th Jun 2017 08:12

You can reclaim VAT on stock that you hold at the time of registration. You can backdate your registration to reclaim earlier VAT but you will have to pay VAT on all sales made from that date.

This is a forum for accountants so they will not necessarily be the best people to ask on the mechanics of running a business. If you want an answer from business people on the advisability of registering for VAT I suggest posting on UK Business Forums. This question comes up there from time to time.

http://www.ukbusinessforums.co.uk/

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Replying to scalloway:
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By munchkinz
24th Jun 2017 17:43

Thanks Scalloway, That makes sense I thought it was odd that you could reclaim all the VAT.
I will check out the other forum you have mentioned.
Cheers

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RLI
By lionofludesch
24th Jun 2017 08:46

Agree.

It's not a licence to reclaim every penny of VAT you ever paid. You can only claim on goods you have on hand at the date of registration - the theory being that you're going to use these later, so they're a cost of the sales you make while you're registered.

For the avoidance of doubt, it's just the VAT you can reclaim. Not any import duty.

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Replying to lionofludesch:
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By munchkinz
24th Jun 2017 17:45

Yes that makes complete sense now, why can't they just word it like that in the first place lol!
And yes I know I can't reclaim the import duty.
Thank you for your help :)

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RLI
By lionofludesch
24th Jun 2017 18:01

As regards pricing, you won't need to stand the whole 20%.

You can reclaim the VAT, so you'll only have to pay VAT on the profit margin if you don't change your prices. If you have a mark-up of 100%, about 10% increase will leave you in the same position as before.

If you truly believe that your customers won't stand the price increase, keep your sales below the threshold.

But, of course, that puts a glass ceiling on your earnings...

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By shaun king
26th Jun 2017 21:23

Let's hope that you are a UK established business!!

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