On 05/10/2020 18:29, williamwright wrote:
On 05/10/2020 15:42, bert wrote:
But he hasn't got a vat number so the whole thing is just a cover for
adding an extra 20% on to the retail price.
--
bert

When he buys it costs him the sale price plus the VAT. He applies his
mark-up percentage to that figure, because that figure is how much he's
had to lay out. What's wrong with that? The various elements of his
buying price are irrelevant to him, and that includes taxes.

Nothing wrong with that...

I think the problem is he is buying an item at say £120 inc VAT. He then
applies his 30% markup. Making his retail price £156.

If he sold it at that price, all would be fine. Not being VAT registered
he won't be able to claim back the £20 quid VAT on the purchase price,
but also he won't need to add VAT to the sale price. So the original £20
VAT just gets passed onto the customer.

However it sounds like he is telling the end user that the price is £156
+ VAT or £187 inc. So he collects an additional £31 of "VAT" from the
customer on behalf of HMRC, which he has no way of passing to HMRC, and
just pockets along with his original £36 of profit!

HMRC tend to take a dim view of such practices. If he issues a fake VAT
invoice to the end user then he is really asking for trouble, since its
likely one of the customers will stick the bill through his company so
he can claim back the VAT. If that gets audited and someone checks the
invoice was issued by a legit business it all unravels quickly.




--
Cheers,

John.

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