General > General Technical Chat
BREXIT - what it means for small manufacturers
Simon:
--- Quote from: coppice on December 28, 2020, 06:49:52 pm ---
--- Quote from: Simon on December 28, 2020, 06:43:34 pm ---That's fine then, VAT registered companies will just reclaim the VAT like they usually do anyway.
--- End quote ---
It takes a long time to reclaim that VAT, typing up considerable additional cash. Interest rates may be low, but this is still not a good situation.
--- End quote ---
Well if your cashflow relies on not paying VAT whilst you are charging it your clearly fucked as a business. As I explained a bit further back normally businesses pay VAT and charge VAT, each quarter the difference is paid to HMRC. So unless you are only buying and not selling you will have that money to hand anyway. Some companies run a separate account for VAT and will always put the VAT charged into that account and then use that account to pay the VAT on invoices so effectively every 3 months what is left in that account is given to HMRC as it would be the VAT on the markup.
You file every 3 months, the money is given taken in under a month. It's actually fairly automated, as I said, it's such a simple system and anything that at first glance looks silly actually gives the system it's simplicity, so you are not arguing about stuff with HMRC and having to show detailed accounts. You just give them the invoices for purchases and sales and get pay/get credited 16.6666% the residual value.
Simon:
There is in fact a simple way to at least try and solve it which is that the seller declares the correct value to the carrier and is responsible for doing so. It would not take that much enforcement work to catch the fraudsters and the sending countries authorities would have to agree to cooperate or their country is bared from using the easy system so it's all done the hard way which means only large importers would bother and importers don't pay the prices that consumers pay.
I just spent £97 with a Chinese company, all due credit to them, just days later fedex have knocked on my door with my goods and were paid $20 for their services. But the invoice has declared the total value at "14" so no idea if USD that I purchased in or GBP and apparently the shipping was free. Now I can't put that invoice against my accounts as I have £97 to justify (fortunately I am not VAT registered).
Who is responsible here? The only way of knowing is if I was to have my accounts inspected and the couriers records also be checked. If customs looked at the invoice in the package when it arrived and did a few minutes of research they could easily find out that the value is completely understated. I mean even if they just charged VAT that is nearly £20 that they would otherwise not have had and it could all be done in 15 minutes, £80/hr has got to be worth anyone's time even if they are paid £20/hr. If they charged me £2 for doing it I would not care. The same goods in the UK would have cost at least 5 times as much.
At one point and I see it is gone now PCB cart had a tick box option in the account settings for "correct value on invoice" which was code for, if you are a business maybe you would like us to be honest as it might cause you more pain than the money it saves.
Simon:
Amazon have just effectively done this. If I were VAT registered any sales made outside of the UK would have the VAT collected by Amazon and paid to the UK government directly completely removing me from the loop.
fcb:
There is no such thing as 'free shipping' as far as customs are concerned.
If your chinese company declared '14' on the CI (COMMERCIAL INVOICE) then they are lying and depriving HMRC of legally entitled revenue. These are the practices that they are trying to stamp out. And yes if customs spent a couple of minutes researching each parcel we'd have instant gridlock in the system.
Also, a CI is not the sort of invoice you can include in your accounts, it is purely a shipping document. Typically you should get or ask for a TAX INVOICE.
Going forward Simon, I would have thought it would make sense to be VAT registered even if you are below the threshold. Accounting SW like Xero make VAT returns painless, and you can at least get an EORI which might help.
Simon:
No it's pointless being registered. Most of what I do is bulk buy and sell. So every sale would have to have an invoice that I would have to create. I would then have a lot more accounting to do no matter the system (I currently use Freeagent) because when you are VAT registered it's not about what is in your accounts but what the invoices say. So I sell an item on Amazon and ebay, I write and invoice for the buyer, but I get the money minus fees so I then have to track down every last document and have to start including money that I was never paid that has to come off the final value for: ebay, amazon (who would collect VAT for me apparently), paypal and stripe.
I'm not sure how all of this works in practice as now I go from just marking money arriving as a sale to a load of paperwork and then I need to get more paperwork to show that some of that money on the invoice never actually hit my accounts. So basically there would be the real money and then all of the invoices going both ways for everything. A lot of work, an awful lot, for what? to add 20% to my markup and give it to the government, or loose 16.66% off my markup and all the work.
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