hummy started this topic @ 09:48 on 06/05/2006
Hi. Wanted some advice from the more experienced business people amongst us.
I've recently started trading on eBay and am relatively happy with the results i've got so far in the short time that i have been trading. I would like to think that i could potentially grow it to be a full time business.
My problem at the moment is that i am pretty much paying VAT at all stages of the process. I pay VAT when dealing with wholesalers, i pay VAT on my listing fees, i pay vat on my final value fees. after some research it seems that to become VAT registered you need to be turning over about £60,000 although you can voluntarily register for VAT if you like. Although i'm not quite earning £60,000 yet from this is it still worth registering for VAT and getting a company registration number to reduce on my costs and only pay VAT when selling to the consumers. I also find that some wholesalers do not actually deal with you unless you are a registered company so think it might be worthwhile.
May be someone can advise me what the best thing to do here is. Should i register or not and if so can someone point me in the right direction of getting registered.
Thanks
RE: Company Formation and VAT
Dewetha | 06/05/2006 09:59 AM
the problem will come that you will have to charge VAT to the people who buy from you on ebay which if you sell your products for the same price will make them 17.5% more expensive for people to buy. You need to decide whether people would still buy from you with this price increase and if you dont think they would you would need to reduce your before VAT price - can you still make money that way?
the 60k is when you HAVE to register as you said you can register before hand. registering before then would increase your paper work but it is not differcult to fill in the returns.
In terms of becoming a registered company, i assume you mean going limited? although this is not expensive to setup my understanding is that it will cost you a lot to keep going in accountancy fees and might not be worthwhile.
as far as wholesalers not dealing with you unless you are ltd surely if you can provide them with invoices even if they are sole trading invoices to show you have been running for a while they would reconsider their position? after all surely they would want all the sales that they can get!
RE: Company Formation and VAT
James Smith | 06/05/2006 11:12 AM
It really depends on who your customers are.
If they are all general consumers than it won’t be to your advantage as noted above this will increase your sales price, although you will of course be able to reclaim your input VAT.
If your customers are other VAT registered business (odd for ebay!) then they wouldn’t care if you had VAT on your sales prices or not (as they will reclaim it), and as you would be able to reclaim the VAT on your costs it would be beneficial to register before you hit the £61k threshold.
If you are somewhere in between things get more interesting. Shameless plug time my ebook "how to understand VAT. Strategies for small businesses" explores these issues in a lot more depth, and is aimed at someone faced with VAT for the first time:
http://www.jamesesmith.co.uk/ebooksvat.htm
Running a limited company is a complex issue - with various legal and tax implications, you will almost certainly need an accountant to help you with this, you cant "muddle through" as you may be tempted to do with a self assessment tax return. There are various other threads on the topic of companies.
Regards,
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James Smith
Chartered Accountant
www.jamesesmith.co.uk
01235 536 773
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Your indispensable guide to Small Business Bookkeeping, Self-Assessment & VAT
RE: Company Formation and VAT
GillOakWeb | 07/05/2006 10:41 AM
I have noticed though on ebay more and more, people stating that the final price needs VAT adding on to it .... I think quite soon it could be the standard practice for those running an ebay shop ....
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RE: Company Formation and VAT
Comspec | 07/05/2006 11:20 AM
I agree - there seems to be more and more.
I am currently setting up my own firm & I will be registering for VAT (though i will happily stay as a Sole Trader). I feel I have to in order to be competitive in my b2b sales. If I do not register for VAT, then I have to take the Gross price of my products and mark them up, giving me less room for manouvre on pricing.
Just out of interest - those of you who have been selling on EBay - Would you quote the gross price and say it was inclusive of VAT, or do you think it is better to ask the customer to add VAT onto the nett price?
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