Manchester accountants face VAT confusion due to Europe

Published on June 17, 2014 by Crawfords Accounting

Our Manchester accountants have encountered several instances of businesses that believe they are operating below the mandatory VAT threshold, but actually are not.

Most business owners are probably aware that if your total sales exceed £81,000, you are required to register for VAT.

However, you might not be aware that if you are buying services in from Europe, the cost of these services must be added to your turnover.

This means that if you use, for example, £3,000 of Google AdWords advertising on top of £79,000 of sales, the total of the two combined would be £82,000 – and you must register for VAT.

You should also be aware that some online marketplaces such as Amazon and eBay are based in Europe, meaning you must add the value of their services on top of your sales figure.

If, for example, you have sales receipts from Amazon of £72,000, following a £5,000 deduction of Amazon fees, your total would be £82,000 because you must add together your sales receipts (£72,000), Amazon fees (£5,000) and value of services from Europe (£5,000) together – and, again, you must register for VAT.

VAT as a whole and in particular the combination of actual turnover, plus value of services from Europe, can be complicated and is not always understood by small traders from customs notices.

It’s important that you register when you reach the threshold because if not you will be required to pay back any historical VAT.  This could have a huge impact on cash flow and tight profit margins.  Going forward you can take VAT into consideration in your pricing strategy but can do nothing about your past prices and could face a loss if you were not VAT registered when you should have been.

If you are unsure about your total sales with regards to the VAT threshold, Crawfords Accountants, Manchester, can help you to calculate the correct figure – and can advise you on becoming VAT registered, if it is necessary to do so.  We have many years’ experience offering advice in this area.  Give us a call today – 0161 828 1000.

We have received an excellent service from the team at RPG for well over 20 years. We particularly appreciate RPG's real interest in our company and suggestions for improvements. The service RPG provides goes well beyond what we could expect.  The attention to detail and the prompt, professional service the team provides means that we are reassured that should we require urgent or unusual advice, the team will provide it. We would have no hesitation in recommending RPG.

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Executive Chairman - SheffProp

I would like to thank RPG for your unbelievable help, assistance and friendship for over 40 years. Nothing has ever been too much trouble. Words alone are insufficient, and I think that the same would apply to my former colleagues and my family who have also come to rely on your advice and guidance.

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Founder - Neville Johnson Offices

We have worked with RPG for many years, for good reason. They are not only extremely knowledge but they really take the time to get to know you as customers and also as people. This really makes a difference, as whilst it is of course important that you receive great service, which we do, it’s also essential to work with professionals who you can really trust and who go out of their way to know your business as well as you do, giving ultimate comfort that you are all striving towards the same goals. I cannot recommend them highly enough.

Jennie Johnson MBE

Kids Allowed

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Gareth Rowe

Chief Financial Officer - ProofID

“As a family business we have been using Royce Peeling Green as our accountants for over 25 years. We have always been impressed with their expertise and depth of knowledge in all financial areas required to help run our business. There is an obvious understanding and trust between the two companies which leads to proactive approach to guide us with short and long-term financial planning. We have found everyone at Royce Peeling Green to be very approachable providing us with the reassurance that they will always provide a professional response in a timely manner.”

David Harrabin

Managing Director - Manchester Slate Ltd

RPG have now acted for our various companies for over 15 years. Their advice and commercial attitude in dealing with Tax, Audit and general businesses matters has always been of high quality and queries dealt with promptly. The team at RPG are experts in their field, they understand the SME market place well. They have been involved in all our corporate transactions, from setting up of businesses, ongoing support of our management teams through to being part of the team that negotiated the successful sale of a group company.

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Genesis Group International

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Managing Director – Ribble Packaging Limited

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