To be or not to be VAT Registered

[meldean]

Sound advice. thank you all for your honest opinions. Will defo not be going down that route.

[WorthDoingRight]

If I understand VAT correctly then being VAT registered is actually less profitable than not being VAT registered. If my example is flawed then maybe someone can correct me but isn't it:

Non VAT reg = buys mug for £1.20 sells it for £7.20 makes £6 profit.

VAT reg = buys mug at £1 (+20p VAT) sells it for £6 (+£1.20 VAT) so makes £5 profit + pays tax man £1 VAT (I think this is how VAT is paid)

Obviously if you are spending lots out on items such as rent, fuel etc it may work out different - but for most small from home businesses I cannot see how VAT registration could be an advantage.

[Charlie_]

If I understand VAT correctly then being VAT registered is actually less profitable than not being VAT registered. If my example is flawed then maybe someone can correct me but isn't it:

Non VAT reg = buys mug for £1.20 sells it for £7.20 makes £6 profit.

VAT reg = buys mug at £1 (+20p VAT) sells it for £6 (+£1.20 VAT) so makes £5 profit + pays tax man £1 VAT (I think this is how VAT is paid)

Obviously if you are spending lots out on items such as rent, fuel etc it may work out different - but for most small from home businesses I cannot see how VAT registration could be an advantage.

indeed your maths is correct Richard. ive never been better off by being registered.................I could be corrected by some one who sells lots of zero rated food stuff of course

[mgibbs]

I'm voluntarily registered because my computer business does mostly B2B trading.

The one advantage for me is that I effectively get a 20% discount on any equipment, software etc. I need.

Mark

[accdave]

If I understand VAT correctly then being VAT registered is actually less profitable than not being VAT registered. If my example is flawed then maybe someone can correct me but isn't it:

Non VAT reg = buys mug for £1.20 sells it for £7.20 makes £6 profit.

VAT reg = buys mug at £1 (+20p VAT) sells it for £6 (+£1.20 VAT) so makes £5 profit + pays tax man £1 VAT (I think this is how VAT is paid)

Obviously if you are spending lots out on items such as rent, fuel etc it may work out different - but for most small from home businesses I cannot see how VAT registration could be an advantage.

But if you're making more profit then you'll pay more tax.

[WorthDoingRight]

But if you're making more profit then you'll pay more tax.

Well I would be happy to make more profit so that I could be taxed more

Anyway you cut it the tax is never more than the extra profit you will make. If you were taxed at 40% of £1 then it still leaves 60p more in your pocket!

[GoldRapt]

If I understand VAT correctly then being VAT registered is actually less profitable than not being VAT registered. If my example is flawed then maybe someone can correct me but isn't it:

Non VAT reg = buys mug for £1.20 sells it for £7.20 makes £6 profit.

VAT reg = buys mug at £1 (+20p VAT) sells it for £6 (+£1.20 VAT) so makes £5 profit + pays tax man £1 VAT (I think this is how VAT is paid)

Obviously if you are spending lots out on items such as rent, fuel etc it may work out different - but for most small from home businesses I cannot see how VAT registration could be an advantage.

So where does the 20p go that seems to be unaccounted for please?

[WorthDoingRight]

So where does the 20p go that seems to be unaccounted for please?

Which 20p if you mean the 20p VAT then it is deducted from the £1.20 VAT and you pay the VAT man the difference of £1. So it is accounted for.

[socialgiraffe]

As a VAT registered business, trust me, WDR's figures are spot on as is MGIBBS about if you are selling B2B it is probably better to be VAT registered. But that point also depends on what sort of business it is.

[GoldRapt]

I wasn't doing WDR down, I was trying to get my head around being a taxman for free, thinking it was 20p

and as your turnover is 75K I'd love to see yer web site whilst recalling Turnover is Vanity LoL:-)