Help with VAT

Help with VAT

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HI,

'Christine runs a small hairdressing salon with a declared turnover including VAT of £1,200 per week. Vatable supplies are about 10% of sales inclusive of VAT. '

Dont really understand the last sentence. Does this mean she is only taxable on 10% of her £1200 revenue and the other 90% is exempt? so £120 p/w is subject to 20% VAT ie £24 a week?

Replies (13)

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Scalloway Castle
By scalloway
23rd Mar 2016 20:47

How I see it

Vatable supplies are about 10% of sales inclusive of VAT. So she pays £200 VAT per week less £20 deductible from supplies ie her VAT bill works out as £180 per week.

Thanks (1)
By Ruddles
23rd Mar 2016 21:01

Scalloway's analysis

Is probably the correct one. But, out of context at least, the statement is very badly written. It could mean something completely different. Perhaps 90% of her turnover is rental income. Who knows?

Thanks (1)
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By cparker87
23rd Mar 2016 21:03

almost
I read it as 10% of £1200 gross being taxable supplies = £120.

Figures are supplies gross so 1/6th is VAT = £20.

Can't imagine why all supplies aren't taxable for a hairdresser though.

Thanks (1)
Replying to SteveHa:
By Ruddles
23rd Mar 2016 21:12

Could be

cparker87 wrote:
I read it as 10% of £1200 gross being taxable supplies = £120. Figures are supplies gross so 1/6th is VAT = £20. Can't imagine why all supplies aren't taxable for a hairdresser though.

or, it could be:

Turnover, inclusive of VAT, is £1,200 = x

VATable supplies = 10% of x = £120

S/R VAT on £120 = £24.

I still favour Scalloway's view, but the whole thing is so badly worded the answer could be any number you want.

Thanks (1)
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By cparker87
23rd Mar 2016 21:15

all failed
I think we've all failed. We haven't read the full question.... It wasn't posted in full!

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chips_at_mattersey
By Les Howard
23rd Mar 2016 22:16

Chair Rental is no longer exempt, and must be taxable. The law changed with effect from 1 October 2012.

I agree with cparker87; why is any of a hairdresser's turnover exempt?

More questions than answers!

Thanks (1)
By Ruddles
23rd Mar 2016 22:22

Who said anything about chair rental?

Perhaps she lets the back rooms to a beautician and masseuse? of course, one wouldn't normally class such income as 'sales' or 'turnover' but given the wooliness of the statement who knows? To reiterate, I still favour the initial analysis.

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Replying to ireallyshouldknowthisbut:
chips_at_mattersey
By Les Howard
23rd Mar 2016 22:39

Chair Rental?

Ruddles wrote:

Perhaps she lets the back rooms to a beautician and masseuse? of course, one wouldn't normally class such income as 'sales' or 'turnover' but given the wooliness of the statement who knows? To reiterate, I still favour the initial analysis.

 

No one. It's just me trying to fill a gap in the OP.

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Replying to New To Accountancy:
By Ruddles
23rd Mar 2016 22:43

Well

leshoward wrote:

Ruddles wrote:

Perhaps she lets the back rooms to a beautician and masseuse? of course, one wouldn't normally class such income as 'sales' or 'turnover' but given the wooliness of the statement who knows? To reiterate, I still favour the initial analysis.

 

No one. It's just me trying to fill a gap in the OP.

You'll need a trade size bucket of Polyfilla

Thanks (0)
Replying to SteveHa:
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By cparker87
23rd Mar 2016 23:06

shameless plug

Ruddles wrote:

leshoward wrote:

Ruddles wrote:

Perhaps she lets the back rooms to a beautician and masseuse? of course, one wouldn't normally class such income as 'sales' or 'turnover' but given the wooliness of the statement who knows? To reiterate, I still favour the initial analysis.

 

No one. It's just me trying to fill a gap in the OP.

You'll need a trade size bucket of Polyfilla

You must be affiliated to Polyfilla. Other cavity fillers are available.

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RLI
By lionofludesch
23rd Mar 2016 22:31

Residential

Maybe 90% of her income comes from the flat upstairs.

Exam Question Setting - FAIL.

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By Matrix
24th Mar 2016 06:05

If she is trading below the VAT registration threshold then she should deregister.  Do I get extra marks?

Thanks (2)
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By bernard michael
24th Mar 2016 10:14

Matrix You got there before me. The cost of a hair cut is the same whether you're Vated or not so why register if you don't have to. I have a hairdressing client who has just gone over the limit and couldn't understand why her accounts turnover went down after she VAT registerd An interesting conversation ensued

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