Tax questions - possibly quite stupid

topcat

Hi all,

doing some reading for level 3 in the accountancy and it states business don’t need to register for tax if the turnover is below £68,000 .

I am a bit confused if they still have to charge tax on standard rate sales or not if this is the case I assume they do ?:blushing:

amyjayne27

Hi Topcat,

No question is a stupid one when you are learning! Bit confused by your question, do you mean the VAT registration threshold? This is currently at £77000. VAT is something completely different, sorry if this is not what you mean!

Monsoon

Are you using an old book? £68k is the VAT threshold from a number of years ago.

EVERYONE has to register for income tax if they are trading (corporation tax if they are Limited).

VAT is a separate animal. If you are not VAT registered you must not charge VAT on your invoices. Once your turnover hits the threshold you MUST register but you can voluntarily register before that.

topcat

Monsoon wrote: »

Are you using an old book? £68k is the VAT threshold from a number of years ago.

EVERYONE has to register for income tax if they are trading (corporation tax if they are Limited).

VAT is a separate animal. If you are not VAT registered you must not charge VAT on your invoices. Once your turnover hits the threshold you MUST register but you can voluntarily register before that.

Kaplan 2012-2013 , Accounts Preparation 1 book. Nice to know it is accurate and up to date haha

"VAT is a separate animal. If you are not VAT registered you must not charge VAT on your invoices. " does this mean a customer would not pay VAT ? but if you are VAT registered you would charge VAT and therefore the customer would pay VAT?

Thanks for both of your replies and help :001_smile:

Monsoon

topcat wrote: »

"VAT is a separate animal. If you are not VAT registered you must not charge VAT on your invoices. " does this mean a customer would not pay VAT ? but if you are VAT registered you would charge VAT and therefore the customer would pay VAT?

That's right. If you buy something from a business that isn't VAT registered, you don't pay VAT. If you buy something from a VAT registered business, you would pay VAT.

If you're a non-VAT registered business that sells Widgets to the public, and you buy them in at £5+VAT, then your cost price is £6 not £5, because you can't reclaim the VAT like a VAT registered business does. You still have to pay it - so your customer does pay it, indirectly.

However, if the retail price of a Widget is £12, then as a non-registered person you get to keep £12. Profit of £6 (£12-6). Your customer pays £12, no VAT.

If you are VAT registered then the retail price of £12 is £10+VAT. Your profit is £10-5 = £5 per unit, and you owe the VAT man £1 (£2-£1). Your customer pays £12, including £2 of VAT.

topcat

Monsoon wrote: »

That's right. If you buy something from a business that isn't VAT registered, you don't pay VAT. If you buy something from a VAT registered business, you would pay VAT.

If you're a non-VAT registered business that sells Widgets to the public, and you buy them in at £5+VAT, then your cost price is £6 not £5, because you can't reclaim the VAT like a VAT registered business does. You still have to pay it - so your customer does pay it, indirectly.



However, if the retail price of a Widget is £12, then as a non-registered person you get to keep £12. Profit of £6 (£12-6). Your customer pays £12, no VAT.

If you are VAT registered then the retail price of £12 is £10+VAT. Your profit is £10-5 = £5 per unit, and you owe the VAT man £1 (£2-£1). Your customer pays £12, including £2 of VAT.

BRILLAINT example makes sense now ! thank you for you help much appreciated !:thumbup1: