purchases requiring vat number for non vat registered busines

[gde1]

Hi,

I am in need of advice.

I am a self employed sole trader selling on Ebay.

The business I used to  buy stock directly from is now using a B2B auction site that requires you have a VAT number to bid on their inventory.

My business turnover does not exceed the VAT threshold so I am not required to charge VAT on what I sell.

Is it legal to open a separate VAT registered business so as I can buy the stock and then sell it through my non vat registered business on Ebay.

If I were to pay the VAT on all stock purchases via the VAT registered business, then forfeit any VAT returns would this be legal and acceptable as I would not be avoiding any tax payable.

I would be paying 20% VAT on my purchases and Income tax on my earnings.

It is unlikely that my turnover will exceed the threshold.

[Trevor S]

No, I don’t think that you could do this with you as sole trader for both businesses.   HMRC would likely regard it as a single business in reality. Also if a business is registered for VAT, it must charge VAT on its sales – this can’t be waived by it failing to reclaim VAT on its costs.

You could VAT register voluntarily (you don’t have to wait until your turnover reaches the £85k) – but the cost of charging VAT on your sales would outweigh the benefit of reclaiming it on your costs.

Do you know why the auction site are insisting on this? Is it just a way to ensure that they are dealing with businesses – if so is there any other proof that they would accept? There’s bound to be others in the same position as you, and I can’t think why they would want to restrict their potential customer base in this way.

Someone else with a VAT registered business could always buy from the site and sell to you “at cost”. That business would reclaim VAT on the purchase and declare VAT on the sale to you – so no overall impact on them.

[gde1]

Thanks for prompt answer.
I dont know why they insist on a vat number, but they wont accept you otherwise. The company is b stock europe.
Could my wife open a vat registered business and sell to me. I am guessing not.

[Trevor S]

If the businesses were truly independently owned and operated, it would be allowable. The fact that the arrangement doesn’t avoid any VAT means that HMRC probably aren’t likely to be too worried either. They’re more looking for cases where someone whose business is likely to exceed the £85k registration threshold splits it into two smaller businesses.

But … are you sure this is the best option? There will be costs to operating the extra business, meaning that the VAT registered business will need to charge you more than they are paying for the goods just in order to break even. There ought to be proper contracts set up between the businesses. And the VAT registered business will be required to comply with Making Tax Digital record keeping and return submission requirements from April 2022. Also the fact that the VAT registered business is likely to be filing zero value returns (due to the VAT on income and expenditure being identical) may well prompt an HMRC check, even if they’re then happy with what they find.

You’ve named the company – it wasn’t one that I’d heard of, so I did a Google search to see if others had reported similar issues and found solutions. I’m sure you’ve done your own research, but if not you may want to look at independent review sites…

[Author]

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