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accepting additional new work may increase the taxable supplies of the business above the compulsory registration threshold .. the vat status of customers is therefore very important in deciding whether or not taking on new business is beneficial:
if customers are Vat registered, they can recover the output vat charged and if customers are not vat registered they cannot recover the output vat charged on.
I am confused . if a vat registered business sell good to general public , doesn’t business get output tax? does customers be compulsory vat registered for recovering output tax??Basically, if a business is selling to other businesses that are VAT registered then if they themselves have to become VAT registered by crossing threshold in output of VAT goods and services produced this should not impact their business as much as selling to non VAT registered customers because these businesses can themselves recover VAT on their inputs ( the goods sold to them) and so becoming VAT registered will not impact price they pay for goods and services since they can recover VAT costs if they themselves are VAT registered.If customers are not VAT registered then they will have to absorb extra VAT cost.If price sensitive they may not be willing to do this and may take business elsewhere.
actually I did not get the point clearly. if customers are VAT registered they get their input tax return but if they are not , the output tax charged on them becomes burden to them. what I have understood is,whether customer is vat registered or not ,business will recover their input tax.. am i right? so does it matter to business if customers are registered or not? anyhow they will get back their input tax .
so I did not understand is whether customers are vat registered or not how this affect to the vat registered business? can you plz explain me in simple language 🙂basically HMRC is collecting vat from general public, if a business is not VAT registered, it will become the ‘general public’ who are suffering vat and couldn’t claim back.
I think the basic problem is that non-registered businesses can not claim back VAT on expenditure.They may be able to expense it against taxable profit depending on nature of expenditure.
V ltd. original sales = 5800/mnth not vat registered
on jan 2015 prices increased and sales price =9500/mnth and registered voluntarily.
all of the customers are general public, it was not possible to increase prices any further as a result of registering for vat.
victor’s standard rated expenses are 400 per mnth
all figures are inclusive of VAT.
a. calculate total amount of vat payable year ended 31 dec 2015
b. calculate net profit as a result of price increase.for the 1st ques, I calculated vat payable and it is 18200.
but did not understand how net profit is calculated.
sales = 114000-18200
expenses= 4800-800what I did not understand is why input tax 800 is subtracted. total of output and input value is already calculated and we got 18200 which is deducted from sales. but that 800 why should we deduct?
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