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Do you pay vat on gross earnings?

Starting a catering business in the UK.. am I VAT exempt?

  • I'm a little confused. I've been reading through HMRC website and Business Link and as far as I can make out I dont need to register for VAT as food is VAT exempt..is that correct? And if so, do I still have to pay VAT when I go to the food outlets ie; costco, macro for example? Also I dont think earnings will be over £70k (although I can hope). Any help would be great Thanks guys and gals xx

  • Answer:

    Unfortunately no. As a rule of thumb only raw food is exempt from VAT. The tax kicks in if you do anything to raw food including serving it raw on a plate! Any processed food you buy will have a VAT element. However, if you stay under the 70k you aren't going to have pay, or charge VAT for raw food. And while you're in that happy position you should be charging as if you were paying VAT It might seem unkind, but I hope you soon get to be VAT registered 'cos that means you're getting there! Best wishes

karis109 at Yahoo! Answers Visit the source

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I don't know the full answer to your question but I can answer some of it. You say that your earning won't be over £70K but what about turnover? Earnings and turnover are different and the VAT threshold is £70K turnover. Turnover is the amount of money that goes in and comes out of your business. Turnover includes the cost of wages and subcontractors, as well as ingredients and equipment bought and produce sold. Earnings are what you've sold less expenditure and overheads. You need professional advice on this. Not all food is VAT exempt. For instance confectionery and food sold in restaurants and takeaways is subject to the tax. Again, you need professional advice. I think that you can get initial advice from the Jobcentre Plus. You may also be able to claim certain grants. Most important of all, you need someone to take you through the administration of starting a business. It is complicated. Finally, I wish you good luck!

Charles S

My understanding of the VAT rules is that if your VAT taxable turnover is above the £70k per year threshold then you MUST register for VAT. If it is below this figure then registration is voluntary. For a catering business though it may be beneficial for you for voluntarily regsiter your business. This is because, depending on the actual goods or services you provide, food is usually zero-rated therefore you don't charge it to customers. But, if you pay any invoices with VAT on them, you would bear the cost of the VAT. If you were registered you'd be able to claim this back by way of a rebate from HMRC. Also I believe companies like Costco, Makro etc. will charge you VAT unless you can prove you are VAT registered.

FatBob

When you buy basic food products at Makro or Costco you pay no VAT on them anyway but if you buy chocolate,crisps,soft drinks,cakes - you will pay VAT on the purchases even bottled water has VAT on it

Jan409

Yes it is GOOD Business .Because it is a unorganised sector Business there is no need of Paying Tax .But however you need to Pay Income Tax.

vasudharealtors

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