VAT Question.

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Keith Williams
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Hello campers,

This is my first post, so I thought I would introduce myself and ask my first question.

I'm a temporary contract design engineer from the UK, working away from home quite a bit. This means I have a bit of time at hand.

Now although I have a good income and enjoy my job I am increasingly of the attitude that I'd like to travel less and spend more time at home. I could find a crappy job close to home for crap money, or I could find a source of supplemental wonga that I could work towards replacing my main source of income.

That's where an online business come in. I could use my spare time away from home playing playstation or going out on the beer... or I could take advantage of that to create something that could achieve my intent on not working away from home in the first place. I can't think of any better business model than that of an internet based business.

Now I did look into all this a couple of years ago, but circumstances and an overwhelming influx of information put the brakes on that.

This time I want to approach it differently, focusing on two areas, goal setting and an activity that I am able to carry out and enjoy doing, which is writing. From that I can build on to take on more areas of business.

I've taken out Jenn Dize's course on ghost writing which I am finding to be incredibly useful.

So enough of the biography, this is my question.

At the moment I operate through my own limited company, and am planning on using this company as the basis for my new business. This company is already VAT registered, compulsory not voluntarily.

I would think that a bulk of any business would be overseas, so how would I go about charging VAT? Would I just charge, say for example, $10, with $1.50 of that being accounted for VAT so I'm only taking in $8.50 or do I have to get involved with the other countries sales tax procedures?
#question #vat
  • Profile picture of the author Richard Tunnah
    Richard Tunnah
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    Keith,
    I think you need to speak to an accountant. My advised some facts and figures and then contacted the VAT office to agree percentages of UK sales and therefore vatable sales.

    Rich
  • Profile picture of the author rondo
    rondo
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    Welcome Keith. What are you selling?
    One option is to use a 3rd party payment processor like 2checkout.com or clickbank.com These companies act as resellers of your product at the time of purchase so VAT and sales tax collection is their issue to worry about, not yours.


    Andrew
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    • Profile picture of the author Richard Tunnah
      Richard Tunnah
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      Originally Posted by rondo View Post

      Welcome Keith. What are you selling?
      One option is to use a 3rd party payment processor like 2checkout.com or clickbank.com These companies act as resellers of your product at the time of purchase so VAT and sales tax collection is their issue to worry about, not yours.


      Andrew
      That's a great point Andrew actually. Clickbank has a few downsides but ease of use with different taxes isn't one of them.

      Rich
    • Profile picture of the author Stefan Vee
      Stefan Vee
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      Originally Posted by rondo View Post

      Welcome Keith. What are you selling?
      One option is to use a 3rd party payment processor like 2checkout.com or clickbank.com These companies act as resellers of your product at the time of purchase so VAT and sales tax collection is their issue to worry about, not yours.


      Andrew
      Can anyone confirm 2checkout collects the Value Added Tax just like clickbank does?
      Thanks!
  • Profile picture of the author Graham Maddison
    Graham Maddison
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    Hi Keith,

    this page from HM Government might give you some clues
    HM Revenue & Customs

    Graham
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  • Profile picture of the author artwebster
    artwebster
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    If your company is registered for VAT in the Uk it must charge VAT on all sales at UK rates.
    Sales for export can be VAT exempted with the correct documentation and proof of final destination but, since the purchaser can reclaim VAT paid outside his won country of residence and pay the local rates, it isn't really a problem.
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  • Profile picture of the author Keith Williams
    Keith Williams
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    Thanks Graham.

    I've been VAT registered for some time and am quite aware of my obligations. I've also used the governments website to find out info about and to pay my return and know what a pain the website is.

    I wanted to post here rather than contact my accountant as I thought people here would have more direct experience.

    Your link has saved me a good deal of heartache.
  • Profile picture of the author pjCheviot
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    Keith

    If you already have a registered limited company, I would respectfully advise you to take advice from your accountant on all matters relating to any additional income/VAT implications.

    This Forum is no substitute for such issues relating to individual circumstances and will only ever result in "generalisations".

    Just my .02 pence worth.
    • Profile picture of the author Keith Williams
      Keith Williams
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      Originally Posted by pjCheviot View Post

      Keith

      If you already have a registered limited company, I would respectfully advise you to take advice from your accountant on all matters relating to any additional income/VAT implications.

      This Forum is no substitute for such issues relating to individual circumstances and will only ever result in "generalisations".

      Just my .02 pence worth.
      Thanks for the reply but I already know about that.

      I've ran my company for some time now and would NEVER embark on anything until I had consulted my accountant.

      I was merely getting a gist of what others had experienced so be better acquainted when I contacted my bean counter.

      Graham Maddison replied with the most useful comment, especially since I know how difficult to get info from the VAT site can be. I would thank him for his Useful Post, but I can't figure out how to.

      Ave atque vale!!
      • Profile picture of the author Graham Maddison
        Graham Maddison
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        Originally Posted by Keith Williams View Post

        Thanks for the reply but I already know about that.

        I've ran my company for some time now and would NEVER embark on anything until I had consulted my accountant.

        I was merely getting a gist of what others had experienced so be better acquainted when I contacted my bean counter.

        Graham Maddison replied with the most useful comment, especially since I know how difficult to get info from the VAT site can be. I would thank him for his Useful Post, but I can't figure out how to.

        Ave atque vale!!
        You already have Keith.

        Glad to be of help.

        Graham
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      • Profile picture of the author pjCheviot
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        Originally Posted by Keith Williams View Post

        Thanks for the reply but I already know about that.

        I've ran my company for some time now and would NEVER embark on anything until I had consulted my accountant.

        I was merely getting a gist of what others had experienced so be better acquainted when I contacted my bean counter.

        Graham Maddison replied with the most useful comment, especially since I know how difficult to get info from the VAT site can be. I would thank him for his Useful Post, but I can't figure out how to.

        Ave atque vale!!
        I trust that when you get a visit from HMRC - you will be able to say "Graham told me about it on the Warrior Forum"

        Good luck.
        • Profile picture of the author Keith Williams
          Keith Williams
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          Originally Posted by pjCheviot View Post

          I trust that when you get a visit from HMRC - you will be able to say "Graham told me about it on the Warrior Forum"

          Good luck.
          Is there something going on with you and Graham?

          As I said, I know about running my company and being already VAT registered I know about VAT issues in the UK and VAT issues within the EU. Additionally I know enough about tax to be extremely cautious about anything that might grab the attention of the authorities. When I said, "overseas" in my original post maybe I should have been more specific and said "outside" of the EU.

          Plus, and more importantly, I said that I would "NEVER embark on anything until I had consulted my accountant", so I'm not sure about how "Graham told me about it on the Warrior Forum" fits into that!

          Besides Graham posted a link direct to HM Customs & customs anyway - I'm not sure how Graham fits into that neither.

          I asked a general question to get some idea about what sort of things to discuss with my accountant, and I thought this site was about helping out.

          Pearsonbrown, to be honest I'm a bit wary about Clickbank, thus had not thought about that, thanks for the info. I'll bear that in mind if and when I do start with that site.

          Graham, I've noticed some posts having "The Following User Says Thank You to * For This Useful Post" and haven't figured out how to do this. So long as you know I'm grateful that's good!
          • Profile picture of the author TelegramSam
            TelegramSam
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            Originally Posted by Keith Williams View Post

            Is there something going on with you and Graham?

            I asked a general question to get some idea about what sort of things to discuss with my accountant, and I thought this site was about helping out.

            Chill out dude.

            No one is attacking you.

            I think you have had some very sensible answers actually.

            Regards,

            Sam
            • Profile picture of the author Keith Williams
              Keith Williams
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              Originally Posted by TelegramSam View Post

              Chill out dude.

              No one is attacking you.

              I think you have had some very sensible answers actually.

              Regards,

              Sam
              It isn't me you need to advise to chill out.

              I've already acknowledged that I've had some good answers.
  • Profile picture of the author TelegramSam
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    Well said PJ.

    Ask your accountant.

    It may be possible to have a separate entity for your new business if it is unlike the one you already have.

    There may be advantages to this, especially if you are able to keep some earnings in the company and/or if you are selling at a volume below the vat threshold.

    Also, having a separate entity could mean you ought to be able to use the flat rate scheme which will simplify accounting matters and it may or may not work out to your benefit, depending on what category your new busness falls in.

    Anyway, it's worth discussing this with your accountant, if he is a half decent one that is :-)

    Cheers,
    Sam
  • Profile picture of the author NetMediaGeek
    NetMediaGeek
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    If its your company that is registered for VAT, you could sey up your other service separately then VAT won't be an issue unless you hit the threashold. I generally just ring the VAT office up and ask them if i am unsure of anything, just sound them out and they will advise you....
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  • Profile picture of the author pearsonbrown
    pearsonbrown
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    "Graham Maddison replied with the most useful comment"

    In fact he didn't. The people who advised you to use Clickbank did. You just don't know that yet ;-)

    Pearson
  • Profile picture of the author pearsonbrown
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    Now that I've had a stiff drink, I'll explain the situation.

    Graham's information is irelevant because it applies to sales deemed to have taken place in the UK.

    However, the EU has decided that online sales take place in the country of the person buying the goods and not in the country of the person selling the goods.

    That means that if a Warrior in France buys a WSO from a software developer in Greece, VAT on the transaction should be charged at the French rate and not the Greek rate.

    In my own case, I used to live in France and buy books from Amazon in the UK. I was charged VAT at the rate for books in France. This is a quote from the Amazon site

    "In accordance with the laws governing members of the European Union, Amazon.co.uk is obliged to charge VAT on all orders delivered to destinations in member countries of the EU. In general, VAT is charged in accordance with the local legislation in each member state."

    So what that means is that you have to charge VAT at the correct rate for the country of purchase. If you have an order from somebody from Poland, you have to charge VAT at the Polish rate. You have to maintain a VAT account for Poland and declare it as such.

    Luckily for us, there is a minimum threshold before you have to do this and none of us are likely to go over it.

    That's why Clickbank is the preferred solution for many of us. The way it works, you "sell" them your product and they then "sell" it on to the purchaser. As they're based in the US, we don't have to charge VAT. They do to purchasers within the EU - but that's not our problem.

    Time for another stiff drink.

    Pearson
  • Profile picture of the author pjCheviot
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    Banned
    Graham, I've noticed some posts having "The Following User Says Thank You to * For This Useful Post" and haven't figured out how to do this. So long as you know I'm grateful that's good!
    Just at the bottom right of each post there is a "Thanks" button.
  • Profile picture of the author TelegramSam
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    Well ok then...
  • Profile picture of the author Steve Garratt
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    Hi Kieth,

    I'm in a very similar situation to yourself. I contract through my Ltd. company, or I used to :-) and I've been earning a living in IM for more than a year now. I' ve been VAT registered for decades. I even live close to you in the UK.

    As far as I understand it anything that you sell to someone outside of the EU is VAT exempt and you don't have to worry about it. Also Clickbank handles it all for you anyway if that's the way you go.

    I market Clickbank stuff as an affiliate and it's where the majority of my income comes from. I enter zero VAT collected on my return but I claim the VAT paid on legitimate business expenses.

    Using Pay per click ads like Adsense to generate income does not attract VAT either.

    Hope this helps.
    Steve
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