In article , John
Rumm writes
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.




+1
--
bert