3 ms·
no VAT: - £10,000 to produce a infinitely reproducible widget -> costs of £10,000 - sell 5,000 times for £10 -> income £50,000 profit of £40,000 with V
by blibble 10y ago
no VAT:
- £10,000 to produce a infinitely reproducible widget -> costs of £10,000
- sell 5,000 times for £10 -> income £50,000
profit of £40,000
with VAT:
- £10,000 to produce a infinitely reproducible widget, all allowable, 20% VAT back -> costs of £8,000
- sell 5,000 times for £10 - (approx) £2 VAT -> income of £40,000
now I have a profit of £32,000 instead
if I'm selling mostly domestically the logical conclusion is to no longer sell to non-domestic EU customers
- toyg 10y agoThe misrepresentation in your calculation is that with VAT you really sell a widget for £12; if you're selling to businesses, they recoup those £2 so they don't care, and if you're selling to consumers all your competitors also factor in the same tax in their prices so again nobody cares. At that point, 5000 widgets at 10 net = 50000 - 8000 net costs = 42000 -> as a business, if your costs include VAT, you're actually better off by opting in. Sure, you feel the pain when you first transition (which is why you should have started with it right away), the first couple of years the taxman will be greedy, and vatmoss is a clusterfuck in its own right, but vat as a concept is actually extremely business-friendly. (I say that as someone who hates it for the regressive flat-tax on the poor that it actually is; I'd be happy to lose it tomorrow in exchange for higher corporation tax, but that won't make you any happier...)
- blibble 10y agoall of my customers, bar one, are non-VAT-registered the actual numbers above are examples, but the scenario matches mine pretty much perfectly, so I'm not sure why you would say that I'm misrepresenting anything these are digital services, not cars or cans of soup
- toyg 10y agoYou must be selling to very small businesses then. Still, your digital services probably involve a website, for which you pay VAT that could otherwise claim back - or is your ISP also not VAT registered? In that case you'd be in a very, very small minority. Even hosting out of your bedroom you'd be paying vat on the iron you buy and the connection you use. And of course there's vat on all your desktop/laptop hardware, consumables, your chair, your desk...