Hello, I import items from the USA and pay just under 10% import VAT on them as they enter the UK. If (as seems likely with Christmas approaching) my sales exceed the VAT threshold this year would I be able to reclaim this against the 20% I am likely to owe for 2013 ? Any help greatly appreciated.
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Yes
You can claim the lot against any sales "output" tax, it goes in box 4 of the return, here's HMRC's page
If and when you VAT register you can claim back the VAT you paid on any stock you hold at the date of registration but not on stock you sold before it.
How are you only paying 10%
I am confused how you are only paying 10% VAT? - or are you purchasing some standard and some reduced or zero rated items?
Also, be aware that any import duty is not VAT, and cannot be offset against output VAT.
You will need ...
... a C79 Certificate which you get each month listing all the customs entries that month. As mentioned above, duty is not reclaimable, only the VAT which is charged on the import value of the goods.
http://www.hmrc.gov.uk/manuals/insmanual/ins12705.htm#IDAHI50G
However, are you VAT Registered yet? It is not clear from your post, if not, you will only be able to reclaim the VAT on stock you still have on hand at the date of registration.
you can't be
You cannot be paying 10% Import VAT. I guess you are paying 10% Customs Duty. However, you will have paid VAT on these items unless Zero rated and if you are registered you can offset the import VAT against the VAT charged on sales. Look at your documentation more closely!!
Reduced rate import VAT
VAT notices 362 and 702 refer to an effective reduced rate of import VAT.
However this is for certain works of art / antiques and is 5% not 10%.
Books and magazines can be 0% import VAT being zero rated, as can certain other goods that are normally zero rated in the UK (eg. childrens clothes).
strange that
I had ignored Works of Art and antiques as I didn't see the advent of Christmas having a big increase for goods under these headings and if goods are Zero rated they are not 10%!!
not quite
You pay £3.33 VAT on the sale of £20 (£16.67 + 20% VAT of £3.33 = £20). I'm assuming that £20 is the actual amount you receive from the customer.
You deduct the £2 VAT you have had to pay out on the purchase. This gives you a VAT bill to pay of £1.33.
So your gross profit (ignoring any other costs such as import duty or carriage in) is: £16.67 less £10 = £6.67.
Time to increase your prices, perhaps, once you are VAT registered?
date of registration
VAT will be due on the sales that occur on or after the date that you become registered for VAT. This date will be shown on the VAT certificate when it is issued after you apply to be registered.
The date would normally be the 1st of the second month following the month in which you go over. So in your example, if you go over in November 2013, you will be registered for VAT from 1 January 2014.
stock on hand
Further good news is that you can also claim for the VAT incurred prior to the registration date for the stock held in hand at the date of registration. If you are going to register look at Cash accounting and also consider Flat Rate Schemes with a 1% discount in first year of registration
@sarz92
Perhaps you can now see the value of having an accountant? Are you going to get one?