Hello
If a person is sole trader and voluntarily VAT registered and say he sells a good for £100 + VAT; and the cost of sale is £50+VAT; then when calculating his self assessed tax, does he include VAT i.e. £120 less £60 = £60 therefore tax on this would be £12; or is it net of VAT so £100 less £50 is £50 and therefore tax is £10
Ignore personal allowances etc
Replies (6)
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VAT and tax
When you do your Accounts, all the figures are net of VAT. Any VAT balance will appear in your Balance Sheet. In your. example, tax is £10, not £12.
Worrying
Hello
If a person is sole trader and voluntarily VAT registered and say he sells a good for £100 + VAT; and the cost of sale is £50+VAT; then when calculating his self assessed tax, does he include VAT i.e. £120 less £60 = £60 therefore tax on this would be £12; or is it net of VAT so £100 less £50 is £50 and therefore tax is £10
Ignore personal allowances etc
It is pretty worrying that someone who appears to be a working in practice (judging by your previous posts) has to ask this sort of question. Have you never prepared a set of VAT registered accounts before?
It is also worrying that perhaps someone is
doing VAT inclusive accounts. As VAT is not an allowable expense it would have to be added back in the tax comps.
Why on earth
would anyone want to do VAT inclusive accounts when VAT has nothing to do with profits or accounts. It is just a balance sheet item.
I think we are talking
a bit at cross purposes. Obviously those tax payers who aren't vat registered will have accounts prepared inclusive of VAT. I have never prepared accounts inclusive of vat for registered tax payers nor do I know anyone who has.
In fact as the VAT is payable on sales and reclaimable on certain expenses I don't see how the accounts would be correct. The profit figure would be the same, yes, but the make up of the P&L would be wrong.