# Sole trader not VAT. registered supplying to VAT. registered businesses



## toblerone (31 Oct 2012)

First post, go easy! I did some searching and couldn't find a similar post.. This is primarily about VAT and is probably VAT 101 to those in the know!

I'm a small-fry sole trader who is not VAT registered. I (re)sell products and services to other organisations (charities / schools who are *not* VAT registered) and some "regular" businesses (who *are* VAT registered). When I issue an invoice the invoice does not include VAT or any reference to VAT apart from a note to say that I'm not VAT registered! I have two questions..

*Question One*

Some businesses have complained that my services "cost more" because I'm not VAT. registered, i.e. they have to pay the full cost and cannot claim back any VAT. I don't think that this is correct because I'm charging "less" to begin with..

If the service costs €100 I'm just charging €100 whereas a company who is VAT registered would be charging them €123 (= €100 + €23 VAT) and the business would then presumably offset the €23 in their VAT return.

_Is my thinking correct or is it somehow beneficial to initially pay VAT and then offset it?_

*Question Two*

This one relates to purchases for resale.. As I'm not VAT registered I have to pay VAT on purchases and cannot reclaim it. If I purchase something for resale the price I pay includes VAT. When I resell it the price on the invoice includes my cost price (which originally included VAT) plus a mark-up but obviously no additional VAT.

If the product costs me €123 (= €100 Net + €23 VAT), I add a mark-up of €27 then I'm charging the business €150 (= €123 Cost + €27 Mark-Up). What would a company who is VAT registered be charging based on the same cost and mark-up? Is it as simple as €156.21 = ((€100 Cost + €27 Mark-Up) + €29.21 VAT)

_In the above scenario the product would appear to be "costing more" from me because they cannot reclaim any VAT. Is my thinking correct? Is there anything I / they can do?_

Any help / advice is much appreciated


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## WindUp (31 Oct 2012)

Question 1 - you are correct - Only thing I could suggest is that they pay the 3rd party directly bit you charge a sourcing fee

Question 2 - your markup is €27/€123 = 23% 

A VAT registerd Company would charge €100 + Markup of €23 (23%) = €123 & VAT €28 = €151


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## toblerone (31 Oct 2012)

@WindUp Thanks for the reply to both questions. With Q1 there appears to be a "saving" by reclaiming VAT but in reality they are paying the same because the VAT is not being charged in the first place.

I'm was a bit confused by your answer to Q2 at first but I think I get what you're saying.. You've calculated my mark-up as a percentage rather than just an amount. If the VAT registered company is adding the same mark-up *amount* of €27 then my calculation holds, I think.

In summary, a VAT registered business buying products off me (who is not VAT registered) has to pay 23% (the VAT rate at time of sale) more for those products and there is nothing I / they can do about it. One possible work-around would be for them to pay my supplier directly and me charge a "sourcing fee".


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