VAT Problem Need Help Please

Jasksta

Hi all,

Okay, so I had a VAT registered business a while back and it all went pretty bad..

At the end of the day I owe the Revenue a lot of money in unpaid VAT and need some advice.

The Revenue have a solicitor attempting to collect the money from me!

Money I do not have. I have had to come to an agreement with the solicitor to pay a minimum amount monthly just to keep them off my back.

I was importing goods from China and selling on ebay on on my website, mainly selling in to the U.K. I'm trying to figure out if the way the VAT was calculated was correct.

So here we go..

Just imagine I withdrew 3000eur to my bank account. I had to pay 380 on postage during this period as I post everything so that's an expense right?

I also paid out 45eur on VAT on miscellaneous items during this period..

and lastly the products that I sold during this period cost me 1800eur.

The VAT Rate was 21.5% at the time.

Can someone with experience help me out here??

Do I:

(A) Add 380 + 45 = 425

So, 3000 - 425 = 2575 x 21.5% = 553

What about the price of the goods, 1800eur?

Or Do I:

(B) Fist deduct the 1800 (for the goods) from the 3000

= 1200 - 425 = 775 x 21.5% = 166eur?

Either way, the money I earned went straight back in to the business to purchase new stock.. should that not be taken in to consideration when calculating VAT?

As you can see, I have little experience and although I did have an accountant, don't think he was not the best to be fair. I'm actually going to call to him this week and request all my documents and maybe have another accountant look over them.

Appreciate any help before I contact the accountant again. It can all get a little confusing when speaking with him. :rolleyes:

TheChizler

Personally I'm not totally sure about the whole expenses side of things, so that's why we now use the services of a professional accountant, but am I right in saying the postage would have formed part of the price paid for the sales by your customers, and you shouldn't be deducting it?

Unless of course you absorbed this cost?

lucky john

Jasksta wrote: »

Hi all,

Okay, so I had a VAT registered business a while back and it all went pretty bad..

At the end of the day I owe the Revenue a lot of money in unpaid VAT and need some advice.

The Revenue have a solicitor attempting to collect the money from me!

Money I do not have. I have had to come to an agreement with the solicitor to pay a minimum amount monthly just to keep them off my back.

I was importing goods from China and selling on ebay on on my website, mainly selling in to the U.K. I'm trying to figure out if the way the VAT was calculated was correct.

So here we go..

Just imagine I withdrew 3000eur to my bank account. I had to pay 380 on postage during this period as I post everything so that's an expense right?

I also paid out 45eur on VAT on miscellaneous items during this period..

and lastly the products that I sold during this period cost me 1800eur.

The VAT Rate was 21.5% at the time.

Can someone with experience help me out here??

Do I:

(A) Add 380 + 45 = 425

So, 3000 - 425 = 2575 x 21.5% = 553

What about the price of the goods, 1800eur?

Or Do I:

(B) Fist deduct the 1800 (for the goods) from the 3000

= 1200 - 425 = 775 x 21.5% = 166eur?

Either way, the money I earned went straight back in to the business to purchase new stock.. should that not be taken in to consideration when calculating VAT?

As you can see, I have little experience and although I did have an accountant, don't think he was not the best to be fair. I'm actually going to call to him this week and request all my documents and maybe have another accountant look over them.

Appreciate any help before I contact the accountant again. It can all get a little confusing when speaking with him. :rolleyes:

There is a major issue here in what anyone setting up a bussiness should know before taking that step but leave that asside for now.

you are confusing the general running costs of your business with VAT.
When you buy almost any product there is a VAT content in the price.

So you recieved an invoice for the goods you buy. On that it will be clearly marked eg.. €100 + (vat23%) €23 = €123

You sell this same item for €150 + (vat23%) €34.5= €184.5

The only part of this transaction that concerns the tax man is the vat part
You collected €34.5 for him. You paid €23 to some one else which he will allow you to deduct from the €34.5. €34.5 - €23 = €11.5
You owe him €11.5.

How ever if you incured any other cost in completing the sale you can also deduct the VAT part of that expence from the €11.5

eg.. you paid a courier €10 + (vat23%) €2.3 = €12.30 to deliver the product. You will need the invoice from the courier to prove this transaction.

now you owe tax man €11.5 - 2.3 = €9.2

The VAT part of All costs that you incur, as long as you have invoice proof, is deductable. (phone, petrol, office supplies, advertising, web site related ect)

Trojan

I recommend getting a good accountant who you can trust with your finances.

Most accountants will do a free initial consultation, so go meet a few of them - look for someone who has been in business 10+ years and deals with SMEs. Ask if they can resolve the situation, can they do it for a fixed fee, etc.

rainbowdash

With numbers like that you wouldn't be anywhere near the VAT threshold so this does not make sense at all.

As others have said you need to go to an accountant and pay him to decipher it all for you.

lucky john

Trojan wrote: »

I recommend getting a good accountant who you can trust with your finances.

+1 .

I should have added that to my post.

Jasksta

So you recieved an invoice for the goods you buy. On that it will be clearly marked eg.. €100 + (vat23%) €23 = €123

You sell this same item for €150 + (vat23%) €34.5= €184.5

I ordered the goods from China.. I actually had a guy in China send me the goods and I was paying him as I was selling them.

Now this was all new to me.. had ZERO experience. Some goods came in to the country and I paid VAT some good came in and I paid nothing.

My accountant had me pay VAT on everything that came in to my bank account minus the postage costs.

It's a mess to say the least and I had no idea what I was getting myself in to.

Paid around €10,000 in VAT and they are saying I still owe around €17,000..

Here's an example of the way I worked it: (figures are not accurate but you get the idea)

So I bought 2000 worth of goods, sold them for 3000. Paid VAT at 21.5% = 645 (forget the postage for a min)

This leaves me with 2355 so I made 355 profit. I then took the 2355, invest it back in to the business and repeat the process.

Looking back I was actually making very little profit but paying large VAT amounts which eventually caught up with me and I had to stop trading!

Anyone recommend a really good accountant in Limerick?

TheChizler

Going by that (what you paid and what you owe) your turnover should be in excess of 152 k, that sound right?

highlandseoghan

You need a very good accountant and very fast. It sounds like there was 100 - 200k in cash going around so thats going to get very messy unless you have a good accountant.

Has the revenue done an audit on your books and thats how they came to the figure that you still owe €11k? Is the 11k including fees and interest? Have you got all your books and invoices, recipts and is everything in good order.

lucky john

quote "My accountant had me pay VAT on everything that came in to my bank account minus the postage costs."

did he go through your books first? Did he (or you) make vat returns every 2 months.
surely you had more expences than postage. (acountancy fees??)

if all he did was looked at your income and submited a vat return bases on 23.5% of that then you really do need a new accountant. The revenue cant see your books so they will accept YOUR return as fact and look for their money. Bear in mind posters here are giving you feed back on the info you provide in your posts. the revenue can only do the same with the information you provoid.

hopefully someone will give you the name of a good local accountant and you can get sorted. in the mean time get every invoice you have together. Get the revenue returns you made as well and any other scrap of related paperwork.
Without that a new accountant cant help you.

3sixty

Jasksta wrote: »

My accountant had me pay VAT on everything that came in to my bank account minus the postage costs.

Have you approached your accountant and asked him why you are in the position you are ?

There is something very wrong here somewhere. wrong advice given, or advice not followed.

Jasksta

TheChizler wrote: »

Going by that (what you paid and what you owe) your turnover should be in excess of 152 k, that sound right?

Have to get out the books and look again but I have papers here in front of me..

Within a two month period I turned over 13,590

Now, 2,350 of that was on postage and another 404 was on VAT I paid out on whatever...

highlandseoghan wrote: »

You need a very good accountant and very fast. It sounds like there was 100 - 200k in cash going around so thats going to get very messy unless you have a good accountant.

Agree

Has the revenue done an audit on your books and thats how they came to the figure that you still owe €11k? Is the 11k including fees and interest? Have you got all your books and invoices, recipts and is everything in good order.

I actually owe them around 17k and no, they have not done an audit. I have the books and some invoices, missing a lot of invoices from my supplier in China for stock. Have nothing to hide here, told them exactly how much I turned over!

lucky john wrote: »

quote "My accountant had me pay VAT on everything that came in to my bank account minus the postage costs."

did he go through your books first? Did he (or you) make vat returns every 2 months.
surely you had more expences than postage. (acountancy fees??)

if all he did was looked at your income and submited a vat return bases on 23.5% of that then you really do need a new accountant. The revenue cant see your books so they will accept YOUR return as fact and look for their money. Bear in mind posters here are giving you feed back on the info you provide in your posts. the revenue can only do the same with the information you provoid.

hopefully someone will give you the name of a good local accountant and you can get sorted. in the mean time get every invoice you have together. Get the revenue returns you made as well and any other scrap of related paperwork.
Without that a new accountant cant help you.

The only other expense I had was, internet, phone and things like that.
The thing is the stock was not even mine to begin with, the guy in China was sending it to me and I was paying him as I went along..

3sixty wrote: »

Have you approached your accountant and asked him why you are in the position you are ?

There is something very wrong here somewhere. wrong advice given, or advice not followed.

Wrong advice given I think, the accountant was not up to much. I will be contacting him, hence my earlier post!

DubTony

Jasksta wrote: »

Have to get out the books and look again but I have papers here in front of me..

Within a two month period I turned over 13,590

Now, 2,350 of that was on postage and another 404 was on VAT I paid out on whatever...

There's no vat on postage so it has nothing to do with vat returns, unless you use a courier (then its not called postage, its called shipping). Assuming the 13590 includes vat at 23% the vat element is about 2.5k.

I actually owe them around 17k and no, they have not done an audit. I have the books and some invoices, missing a lot of invoices from my supplier in China for stock. Have nothing to hide here, told them exactly how much I turned over!

The only other expense I had was, internet, phone and things like that.
The thing is the stock was not even mine to begin with, the guy in China was sending it to me and I was paying him as I went along..

Was vat paid to customs when the goods came in? You can claim this back. The vat on your phone bill and Internet can also be claimed. Remember the vat element of everything your business buys can be claimed back.

If you get a very basic book-keeping course under your belt, you'll never need an accountant for vat again. This stuff is really very simple when you get your head around it. If you ever have a difficulty while doing a return, the best people to talk to are the VAT people in Revenue. They are always extremely helpful ... and they don't bite.

Al Capwned

From reading your posts OP, i'm guessing you didn't have a great knowledge of how the vat system works.

I would recommend you have a good read of this.

Revenue Vat Guide

Good luck.

Corkbah

sorry if this is veering off topic .... you had approx €13K turnover in a 2 month period and you are questioning a €17K bill from revenue ??

to me it looks like you may not have made proper provisions for VAT and/or have been under declaring vat or not declaring vat on your sales.

if you were mainly selling to the UK - did you include VAT in your sales or did you remove the VAT as they were not an Irish customer ?

something to look into is that if you are selling to outside of the state you do not have to apply VAT as the person is VAT exempt due to being a non-resident in the country, you however may be liable for export duty.

have you checked if the revenue are saying you owe money for undeclared VAT, import/export duty ? Income tax or another form of tax ? ...give revenue a call and ask them to explain it to you, tell them you simply don't understand what they mean when they use some jargon, best line I've heard was when a guy I know is asking someone to explain something to him he tells them ..... "explain it to me like I'm a five(5) year old" ...its simple but effective and makes the person use simplified terms instead of jargon.

lucky john

Corkbah wrote: »

something to look into is that if you are selling to outside of the state you do not have to apply VAT as the person is VAT exempt due to being a non-resident in the country, you however may be liable for export duty.

This is only true if you are selling B2B and the customer provides you with a valid VAT number. export duty will not be an issue inside the EU.

DubTony

Corkbah wrote: »

sorry if this is veering off topic .... you had approx €13K turnover in a 2 month period and you are questioning a €17K bill from revenue ??

I think you're a bit off the mark here. Firstly, we don't actually know what period of time the OP is talking about. If 14k is typical turnover, that's less than 85k a year. Vat in that would, at the time, have been lass than 15k on sales alone. The vat on cost of goods would have to be deducted along with the vat on other costs.

OP, Looking back at your second post. It seems your accountant is an idiot, or you're not giving us the correct info. It also appears that you're pretty clueless about this.

VAT should be added to the selling price and charged to the customer. If you didn't charge VAT on top of the 3k in sales, then under tax laws, the VAT is assumed to be included in the price. So the VAT element is not 645 but actually 530.86. Your REAL selling price is 2469.13. Remember, Revenue doesn't charge you VAT, they simply use you as a collector. The customer pays the VAT, but if you screw up when collecting it, it's tough on you.

Going into business as a vat registered individual (I'm assuming you didn't run a Ltd company) and not knowing the basics of how VAT works is a bit stupid. As a sole trader you are personally liable for every penny. So if your accountant makes a mess, you're liable for it, unless you can successfully sue the accountant for your loss.

Corkbah

DubTony wrote: »

I think you're a bit off the mark here. Firstly, we don't actually know what period of time the OP is talking about.

did you read this post from the OP

Jasksta wrote: »

Within a two month period I turned over 13,590

Thats where I made my comment from and would be where I figured out where the two month period the OP is talking about is !!

barneystinson

Corkbah wrote: »

something to look into is that if you are selling to outside of the state you do not have to apply VAT as the person is VAT exempt due to being a non-resident in the country, you however may be liable for export duty.

And statements like this are the reason threads like this tend to get closed fairly quickly on the taxation forum. Complete nonsense. No-one is VAT exempt - it's the nature of the supply that determines taxability.

Corkbah wrote: »

have you checked if the revenue are saying you owe money for undeclared VAT, import/export duty ? Income tax or another form of tax ? ...give revenue a call and ask them to explain it to you, tell them you simply don't understand what they mean when they use some jargon, best line I've heard was when a guy I know is asking someone to explain something to him he tells them ..... "explain it to me like I'm a five(5) year old" ...its simple but effective and makes the person use simplified terms instead of jargon.

To which my response would be, can you put your mammy or daddy on the phone so please...

dbran

OP.

Seek professional advise about this before you end up even more confused. There is a lot of inaccurate advice being given on this thread.

Dbran