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  • Martin Oxenham

    Member
    December 30, 2010 at 12:24 pm

    What people are forgeting here is that paying vat is not really relevant to someone in business. Those that say they can’t claim back vat are wrong. They do get it back as part of the business outlay. If your vat registered you keep the vat and claim the rest as a business expense, if your not registered they you claim the whole lot as a business expense. Heres an example….
    Signmaker A is registered.
    It costs him £100 plus vat for materials, to him the vat is not relevant so he sees it as it has cost him £100. He wants to make £100 profit so he charges £200 + vat = £240 ( at 20%). He takes back his £20 and pays the other £20 to the vat man, He claims £100 as the business outlay. giving him £100 clear taxable profit.
    Signmaker B is not registerd
    so the materials actually cost him £120 so to make £100 he has to charge £220, so to a customer whos not registered then he is cheaper by £20.
    He claims £120 as his business outlay and makes the same £100 profit.
    But in reality the customer is no better off except that he has to find an extra £20 now, but when his tax is calculated at the end of the year from his profits he either claims the amount without vat as a business expense before he makes a profit or the amount with vat before he makes a profit. Its all part of the overheads.
    Someone who is registered is merely collecting the money on behalf of the government free of charge.