Calculating Profit Once Vat Registered - HELP
I’m getting really confused with this.
I have always calculated my profit by doing the following whilst not being vat registered:
Net Proceeds - COGS buy price incl vat (plus prep, shipping to amazon etc).
I am now due to go vat registered, but as I won’t be changing my sale price by increasing it 20% and my sales price will remain the same, I need to calculate my profits as the following:
Net Proceeds - COGS - buy price excl vat (plus prep, shipping to amazon etc), but using the sale price less 20% to account for the 20% ill collect and pay on the sale, BUT the Net Proceeds are based on the original sale price, and therefore I won’t get an accurate figure.
Surely I need to see the net proceeds after the sale price is less 20% vat?
I’m confused.
72 replies
Seller_7VbclcPFFRTnc
Use all your net costs
Net sales price
Minus
Net cost of goods
Amazon fees (as they are not subject to vat anyway)
Edit - why are you absorbing the costs of vat and not raising your price ?
Seller_esvgLzKXw2YAl
Net costs are the way forward.
But you can use the revenue calculator and include most of the obvious costs, to allow for VAT in it as well. That will give you a per item profit/loss.
But otherwise, you should really be keeping some sort of accounts, where you can work this all out for an entire day/week/month and so on.
I presume that your aware of the requirement for MTD as well?
Seller_tRuvBEHDedp4q
As others have said - for profit now use net figures (i.e. VATless figures)
For turnover use actual figures (i.e. total sales + any shipping charged)
Continuing TLS example, if before you were selling at £18 and buying in the goods (COG) at £3 + VAT (£3.60) your profit was £18 - £3.60 - Amazon fee
Now as you are keeping sale price the same your profit is £18 - £3 (VAT collected) - £3 (net COG) - Amazon fee
Your Amazon fee will probably be the same in either case as Amazon are based outside the UK they do not charge VAT (however, on your VAT return you have to account for this under the Reverse Charge scheme - please see an accountant)
Seller_qZO3ZCjoBXEeL
I’d strongly suggest you refactor your entire thinking to ex-VAT.
Think of your pricing as price+ VAT
Think of your COGS as price ex. VAT
Most business expenses are usually quoted ex. VAT
Your calculations are then all pretty straightforward.
If you want to work out the Amazon referral fees (because they are based on VAT inclusive price) just think about the percentages differently. for a 15% class (actually 15.3%) it would actually be
VAT inclusive sale price £12
referral fee (15.3%) £1.84
Effective referral fee % on ex. VAT price 18.4%
Then just run everything on ex VAT numbers.
Seller_5JSHN7dJRVgOE
GOT IT!!! Thanks for all of your help!
Seller_ae51e0CJoHqCX
You really need to see an accountant and understand how VAT works. You may save yourself money by going onto a flat rate scheme (depending on your location, turnover etc) and an accountant can explore this with you if you are struggling with the workings on this. A flat rate scheme mean you pay a percentage of your turnover at lower than 20 percent but you can’t claim anything back. If you was on a flat rate scheme it would probably make it clearer for you and you wouldn’t be basing your figures on 20 percent.
I see you have already had some good advice on how to work out VAT so won’t trouble you with the same but honestly a good accountant will pay dividends and save a lot of stress and costs later on down the line.
Seller_8yjZ4K9vAu9b2
Also worth noting that moving forward, you can deduct VAT from your cost of goods, as this would be claimed back, for example;
100 units at £10 per unit = £1000 and im guessing your current cost would have included VAT?
So on your next purchase, the same £1000 spent including VAT will actually only cost you £800, so your new per unit price is £8, not £10, (Once VAT is claimed back)
Just a consideration, Im nowhere near the threshold yet, so I may be wrong in what Im saying? Im sure someone will put me right if I am 
Seller_ub8euQIptQnH8
I have just gone through this, and closely look at your products you have in stock at the moment. I had to totally re-adjust my pricing for the stock I sourced prior to going VAT registered. Now, I am out of the other side, things are ok, but 6 weeks of pain…
Also, don’t forget you can claim back 6 months of VAT, but make sure you have everything sorted, receipts etc. I am doing this and just had to prove to HMRC sales, invoices etc.
Seller_8yjZ4K9vAu9b2
Who knows? My public school education can only drag me so far
All joking aside, I should apologise, I shouldn’t have been rude. @Essentialsinstock Im sorry, it wasn’t necessary and also not relevant to the subject, please accept my apologies.
Seller_3u63TG7fpfnG6
get an accountant, there are plenty of small ones that will not cost the earth
save yourself the headache, plus it is all tax-deductible
