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Do you pay vat on gross earnings?

Can someone please explain UK VAT rates?

  • I am registered as a self employed caterer. I dont expect my turnover to go over the VAT threshhold at this time. However, I am paying VAT on all the food I buy so I am considering registering for VAT voluntarily. What does this mean for me? I can claim back the VAT I pay at the wholesalers for the food I buy to re-sell but do I have fees to pay for being registered? Does it affect my earnings etc? Any help appreciated, as always Thank guys and gals xx

  • Answer:

    If you register for VAT you will need to charge VAT on what you sell, putting up your prices 20% at a stroke. The savings you make might mean that you can lower your prices, but it won't be anything like 20%. The position of VAT on catering is complicated and you really would be well advised to talk to an accountant for specialist advice. There are various ways to operate VAT (cash, flat rate etc) and without knowing the full picture it's impossible to know what is in your best interests.

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You're not paying VAT on food you buy. Almost all food is zero rate, so the input reclaim will be minimal, but you will have to raise your prices by 20% to cover the VAT you charge. Don't register voluntarily, there's no advantage.

I don't get points any more

A lot of the food you buy will be zero rated but as you supply catering, what you sell will be standard rated. The result of registering for VAT will probably mean an increase in the prices making you less competitive. Where it could be useful is if you are incurring a lot of VAT on capital expenditure or potentially rent.

Jim

I didn't think there was vat on food? "Onestep..." If no vat is paid upon purchase... why would vat be charged upon sale? Surely if its vat free its vat free? You would of course be able to reclaim the vat on fuel , a van, and other business expenses. It should not affect your earnings.

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