From: "Roland Watson" 
Newsgroups: uk.finance
Subject: Re: Yet another VAT question (or two)
Date: Thu, 18 Sep 2003 10:18:17 +0100

Thanks for the various replies.

Roland.

"Ronald Raygun"  wrote in message
news:bgF9b.11906$hq3.104746105@news-text.cableinet.net...
> Roland Watson wrote:
>
> >
> > "Doug Ramage"  wrote
> >>
> >> If you are not VAT registered, you cannot charge Vat to your customers,
> >> nor can you recalim the Vat which you have been charged.
> >
> > Okay, so for the sake of cashflow, you should either register for VAT or
> > pass your own VAT cost onto the customer? I would have thought the
latter
> > was preferable since it would involve less red tape?
>
> It's not only a question of red tape.
>
> Taking an example of buying in stuff costing £200+VAT which you
> process and sell for £400+VAT, then if you are registered, your
> cashflow in is £470 (from your customer), while your cashflow
> out is £235 (to your supplier) plus £35 (to the VATman, though
> this is really £70 output VAT minus £35 input VAT), leaving
> you a profit of £200.
>
> If you were not registered, your cashflow out to your supplier
> would still be £235.  You'd have a choice between charging the
> customer £470, thereby making a bigger profit of £235, or charging
> only £435, thereby making yourself more competitive, or anywhere
> inbetween.
>
> It depends whether your customers are themselves registered.
> If they aren't, you have the triple benefit of less red tape,
> more profit, and more competitiveness (with the last two being
> traded off against each other), but if they are, then you make
> yourself either less competitive or you expose yourself to having
> to take a cut in profit.  This is because your customers cannot
> reclaim the VAT which is "hidden" in your prices.  Because you
> are not VAT registered, you cannot issue VAT invoices, you can't
> explicitly charge them VAT, and so they cannot reclaim it.
>