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VAT Payments - A Bloody Stupid System

Discussion in 'General' started by Gareth Halfacree, 3 Aug 2020.

  1. rollo

    rollo Well-Known Member

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    For some info

    it depends what your using the raw materials for, if for example your using those goods to make a online game and have paid someone for the raw materials ( aka a game engine) you can’t claim back the VAT on this.

    it’s a total minefield of trip ups and issues

    the way I have always read it, and I fill in these forms yearly for people who pay me to do it, VAT on raw materials can be done as long as your not using said raw materials to create new products or services.

    if your building a new drive way with your raw materials you could claim the VAT back for example, if your building a computer and selling it on, you can’t claim the VAT back on the raw materials it took to make said computer

    if that makes any sense, toss me a pm if you need help with VAT stuff and I can sit and go through it with you in private.
     
    Gareth Halfacree likes this.
  2. Gareth Halfacree

    Gareth Halfacree WIIGII! Staff Administrator Super Moderator Moderator

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    That's not my understanding, but perhaps I'm reading it wrong.

    When you register for VAT, you can backdate claims for VAT on goods for up to four years (six months for services), including raw materials - but only if you still have the materials on-hand or you used the materials to build other goods that you still have on-hand. Which is effectively what you're saying above, I think.

    However, post-registration you can claim VAT back on raw materials regardless of what you're doing with them - it only affects how you "claim back" that VAT.

    If you bought the materials and they're sat in a warehouse, you claim back the VAT straight. Simple.

    If you bought the materials, built a thing, but didn't sell it on, same as above.

    If you bought the materials, built a thing, and sold the thing, the VAT paid on the materials becomes an "input VAT" on the transaction while the VAT you "charged" your client for the thing becomes the "output VAT." Effectively, you're still "claiming back" the VAT, but - as previously mentioned upthread - it's less "HMRC owes me £5 and I owe HMRC £10" and more "I owe HMRC £(10-5)."

    There are no scenarios I can see, however, in which you eat the VAT on the raw materials - except for the edge case where you're using the materials to build VAT-exempt (not zero-rated) end products, which is explicitly stated on HMRC's guidance.

    That sound right to you?
     
  3. rollo

    rollo Well-Known Member

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    Its a complicated mine field of hell is one way to put it. What you have said is one way to look at it all yes.

    Raw Materials is a difficult one, The best example is that of a house builder, He buys the materials in bulk like bricks ect and they might sit in his storage for years before getting used he could claim the VAT back as he has not used them. Once he uses them he gets billed VAT on the product he builds AKA the house

    This becomes alot more complicated if your in the digital space.

    If you make for example a online bingo game, The Raw Materials you used to make it ( AKA the Source Code if you brought it) You could not claim back VAT in this scenario at any stage.

    I do not know what you plan to make Gareth but Digital products tend to be alot more complicated on VAT than a physical one.

    I log in every day though so if you did need someone to go through it drop me a PM and I can give you a contact number ect
     
  4. Gareth Halfacree

    Gareth Halfacree WIIGII! Staff Administrator Super Moderator Moderator

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    Same thing I've been making this past 15 years: words and the odd picture. Simplifies things a lot: I don't really have any "raw materials!"
    Cheers, buddy, appreciate it - though my first port of call will be my accountant, 'cos he's the one I'm paying every month to worry about all this crap on my behalf!
     

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