Vat Query

R

RedStix

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A friend of mine is setting up as a sole trader and is going to have an online webshop selling clothes. Does she have to have a VAT number? She will earn under the legal requirement for VAT, €55K I think it is. But does she need a VAT number to order supplies from suppliers overseas?

Already one supplier has requested her VAT number on all orders. Anyone got any views, tips, advice?

Thanks
 
GED said:
A friend of mine is setting up as a sole trader and is going to have an online webshop selling clothes. Does she have to have a VAT number? She will earn under the legal requirement for VAT, €55K I think it is. But does she need a VAT number to order supplies from suppliers overseas?

Already one supplier has requested her VAT number on all orders. Anyone got any views, tips, advice?

Thanks
Click to expand...

The overseas suppliers need her VAT number in order not to charge her VAT
 
She will earn under the legal requirement for VAT, €55K I think it is
Click to expand...

You do realise the 55K is the turnover or sales figure. What margins will she work to. What profits will she expect
 
Since 01/03/07 the turnover threshold for VAT in Ireland is €70,000 for sale of goods and €35,000 for services. If her turnover therefore is expected to be less than €70,000 she does not have to register for VAT here. In that instance, VAT will be suffered on all purchases (home and foreign) and becomes part of the cost ( irrecoverable VAT). VAT would not be charged on the sales.

However 3 points :-

1) A trader may voluntarily register for VAT even if under the turnover threshold. In that case VAT is recoverable on purchases and expenses and VAT is payable on VATable sales. In that case a VAT number would be available for EU suppliers and the goods would ship excl VAT. VAT would then be claimable on Irish expenses, phone, light & heat etc. VAT at the apporpriate rates 0% of 21% would then apply to the sales here.

2) Some clothing is 0% VAT i.e. childrens :- Clothing marketed or labelled as being for children under 11up to & including chest size 32; waist size 26; height 152 cm or other equivalent sizes . Fur clothing 21.0%. See
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Adult clothing is 21%. Depending on the type of clothing sold it may be worth investigating the net VAT payment position here. For example someone selling only childrens clothing would be selling at 0% but could claim VAT on costs and that person may be worth registering for VAT even if under the threshold.

3) Registering for VAT while under the threshold in a case where sales are predominantly 21%, would result in VAT at 21% being paid on the profit margin. That may not therefore make it worthwhile to register in that case.
 
Sorry. Just one more quick query. I'm really very green at all of this

So if she is selling adult's clothes online and is not vat registered she doesn't charge the customer VAT. Is that right?

I thought people had to pay VAT?
 
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GED, only VAT registered traders can charge VAT. However, in this case, the end consumer is effectively paying VAT as your friend will have to pay VAT that she can't reclaim and this cost will be passed onto her customers.
 
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