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    1. cosmicjazzer is offline

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      #1

      Necessary to register for VAT?

      I'm trying to get my head around VAT and determine whether I might need to register. I wonder if someone in the know would be kind enough to comment...

      In short, I'm hoping to create an ebay business selling items connected with music technology: microphones, audio mixers etc. for home studio setups (ie. musicians with a recording setup in their bedroom!) I hope to stock a limited range of items purchased from relevant distributors at the cheap end of this particular market (£50 to £500) and will probably only make a few sales a month... but such a supplement to my main income (as a musician) would be perfect for my particular needs, actually.

      Anyway, the question on my mind is: Although I do not expect to get near the VAT threshold, I do wonder if I should (or if it would be mandatory to) register for VAT. For one thing, I wonder if it might bother the distributors in question if I were not registered... In this particular market, I know I would certainly be the only seller on their books not to be VAT registered! But would this make any odds to them, from an accounting point of view?

      I know that a smallish proportion of my potential customers ARE going to be VAT registered. Am I right in thinking that they would not be able to claim back VAT on purchases made from me if I were not registered?

      I feel as if I'm groping in the dark (story of my life!!) when it comes to VAT. Any thoughts/clarification would be most gratefully received.
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    2. carlosse is offline

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      #2
      It's a math game, if your revenue is below 70k it is better not to be registered. On the other hand, being VAT registered gives a plus to your business, it is ultimately up to you

      If you buy 10k (you can save VAT on these 10k), you save 2k
      If you sell 20k (you pay VAT on this 20k), you have to pay 4k
      Result, better not to be VAT reg, but it's up to you and this is a lame simple example, just for your reference
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    3. cosmicjazzer is offline

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      #3
      Many thanks for taking the time to reply, carlosse. I get the maths in your example and, all else being equal, I would definitely prefer not to be VAT registered!

      Actually, for me, I suppose the issue ultimately comes down to whether the relevant distributors will allow a non VAT registered person to be 'an authorized dealer' for them. That's something I can only find out from them but I'd guess it might well boil down to the following question, which I hope someone can answer:

      If I sell an item to a recording studio who IS VAT registered while I am NOT VAT registered, does that mean that the studio will not be able to claim back the VAT on that item? I'm guessing it does indeed mean that, but I'd really appreciate absolute confirmation!

      Thanks

    4. Emma Pollard is offline

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      #4
      You cannot charge VAT if you are not VAT registered, therefore they cannot reclaim it as they haven't paid it.

      When they do their VAT calculations it works like this:

      VAT paid (to supplier) less VAT received (from customer)
      If they have received more than they have paid then the difference is paid to HMRC.
      If they have paid more than they have received they get a refund.

      I know it's kinda complicated but I hope this helps.

    5. Lingerose's Avatar
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      #5
      Definitely with VAT registration you look more professional.

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