Is it advisable to sell above £85k Compulsory VAT registration in the 12th month of VAT Calendar year?
Hello Everyone,
Just one more thing about the VAT inclusive. for someone that is about to clock £85k turn over sales for the first time in the last month of VAT year. (sell above £85k in 1 year to be VAT registered)
Is it advisable to go above it and be VAT registered or Just stop selling and miss 1 month of sales to resume back selling the next year so to start selling without VAT again?
Or does the Advantage overweigh the disadvantage on Amazon?
Please I need honest answer from a VAT Registered seller on Amazon.
Thanks
50 replies
Seller_7VbclcPFFRTnc
its a rolling 12 months - not a set 12 months therefore 1 month off isn’t guaranteed to keep you off the limit
and to note, you need to register within 30 days of hitting that £85k
Financially, you need to make the decision - i know of someone who used to close their shop for 3 months of the year to keep below the threshold as they were over 60 and knew retirement was looming and could be bothered with the hassle. Others embrace it and push to go way above and beyond the £85k
Seller_NoMNQDGnEW5Bx
Don’t forget it also includes your sales on other channels as well…
Seller_esvgLzKXw2YAl
If you intend to keep growing, then this is something that your going to have to do at some point.
It is a calculation that you need to make in the meantime though.
I’d strongly suggest that you speak to an accountant, to get accurate advice about this.
There are a few different schemes available, and one of them may suit better than standard vat.
And has already been mentioned, the calculation for turnover, is ANY 12 month period.
Certainly not the calendar year.
Seller_I3E6fQQqOFqlF
Don’t forget you lose 20% of everything you sell once you go VAT registered. You can off set that by claiming VAT back against purchases but you inevitably end up losing. As said the £85 is a 12 month rolling so it’s £85 in the last 12 month period not financial year.
Seller_77IcbQKVGdZo0
From another angle…
If it is only going to go above the threshold temporarily you can apply for an exemption from registering from HMRC.
Obviously talk to your accountant (if you have one) if you think this could apply to you
Guidance below
Get an exception
You can apply for a registration ‘exception’ if your taxable turnover goes over the threshold temporarily.
Write to HMRC with evidence showing why you believe your VAT taxable turnover will not go over the deregistration threshold of £83,000 in the next 12 months.
HMRC will consider your exception and write confirming if you get one. If not, they’ll register you for VAT.
Seller_7VbclcPFFRTnc
just to note - you may have a problem anyway as i’ve just checked your profile on amazon and for some reason you have a German VAT number registered on your UK account
do you have an accountant ?
Seller_24Bec1n3QCVmi
I agree with @NEil. You’re looking at this all wrong.
Let’s look at a product that’s £10…
You sell it now for £10.00
You buy it for £3.00
You pay Amazon approx £1.80 in fees (assuming 15% fee + vat)
Your profit is £5.20
Now, if you’re vat registered
You sell it for £8.33 plus vat
You buy it for £2.50 plus vat
You pay Amazon approx £1.50 in fees
Your profit is £4.33
So, if you want to make the same profit as pre-vat registration, you only need to increase your price by about £1 BUT that still doesn’t take into account the fact you can claim your vat back on your bills, rent (if in commercial premises), any business purchases you make.
It’s also very short sighted to only ever want to stay below the vat threshold. Any business should have the ambition and drive to want to grow their business as much as they can. If you are worried about adding an extra 10% to your prices, that’s never going to happen.
Seller_Rds42gzScDQFa
This is something I’ve been concerned about for a while as I don’t want to be VAT registered. I used to think that the threshold for VAT was over the tax year but recently I was informed it’s not, that it is in fact a rolling 12 month period. Thankfully my sales on every platform have never exceeded the VAT threshold. But since learning that it’s a rolling 12 month period I regularly check what my turn over is over the past 12 months.
If it seems I’m going to reach the threshold for VAT registration I will put all of my stores on holiday mode, thats all platforms. I only have one Amazon seller account. I’m too old to have the hassle of VAT which I see as just another headache.
Seller_XwvGSmSRPcpLG
You can also opt for VAT FRS scheme in which the rate will be 7.5% instead of 20%, the only drawback is that under FRS you can not claim back anything from HMRC. You just have to pay 7.5% to HMRC (first year 6.5%, following years 7.5%). Do your calculations on 20% vs 7.5% and then decide. Under 7.5% once then revenue increase over 230,000£ then you would move to 20%. In most cases I have seen 7.5% is still turning out to be profitable, but again do your maths and then decide.
Seller_6sxtIS0RbZ5k7
I’m in agreement with @blue_eyed_boy, I don’t want to have to register for VAT and, if I need to, will choke sales to make sure I stay under the threshold.
Obviously you need to weigh up the future of your business, if you are young and want to grow then it makes sense but, for me, I’m happy with what I am currently making and don’t want the hassle of doing VAT every 3 months (I am very disorganised as it is so this would be an added stress.)
Add to this that, even though you can claw some of it back, say, for example, you end up only paying 10% of your profits as VAT, that 10% is still coming out of what is currently your net profit. If your net profit is currently 40% of your sale price, you would now have to sell at least 25% more to make the same money you are now.
I understand what people are saying about putting prices up so the customer pays it but, for some things, (in my case, greetings cards), there is a ceiling to how much people are prepared to pay.
