VAT anamoly???

[dobrien64]

Hi,

As a new computer services startup, doing mainly pc/laptop repairs rather than supply of goods/parts, I am not obliged to register for VAT as my turnover will not go anywhere near the threshold.

In the scenario that the price of a job is, say, 100 euro, and the VAT rate is 21% .....

How can it be fair that I, non-registered, can keep the full 100 euro, while my registered competitor can only keep 83 euro (approx) i.e. he must hand over the 17 euro difference to Revenue!!!

I do realise that he can reduce this VAT liability by the VAT on his inputs, and I can't, but even at that, it does seem unfair.

Am I missing something?

 

[fender]

Yes - If you are not registered for VAT you cannot charge VAT. You can only charge 83 euro. An invoice that you give to the client must show clearly the VAT amount and you must have a VAT number. The client can then claim the portion of vat back if they in turn are vat registered.

When a company pays VAT to the revenue it is the total of all the VAT charged on the invoices minus the total of all the VAT paid on goods purchased.

 

[callybags]

You can charge what you like.

If you are supplying the service to a non-registered person, then you are at a compeditive advantage by being non-registered yourself as the VAT registered supplier must charge VAt on their price.

 

[dobrien64]

Yes fender, I see what you mean.

By the way, I should have mentioned that this is only a 'part-time' business(yet!). It would be difficult to run a fulltime business and feed a family on a turnover of €27,500 less income tax, prsi, etc, etc.

But two points in relation to the scenario:

(1) my invoice/bill will show 100 for the job - no VAT - cos that's my price.
My competitor, to remain competitive, might also charge 100 total, made up of 83 and 17. He keeps 83, while I get to keep the full 100.

(2) My customers are end consumers, i.e. my business is mostly b2c. Therefore, VAT reclaims don't come into it.

See what I mean, seems a bit unfair!

 

[dobrien64]

That's it callybags - you got it!

 

[mandelbrot]

There is currently a VAT registration threshold turnover amount of 37,500 for suppliers of services. So you only have a "competitive advantage" up to the point where your turnover reaches this threshold.

Just to turn this around slightly...
The only way to avoid this anomaly entirely would be to have a VAT registration threshold of zero... That would be impossible to administer. So the current limits are a happy medium.

 

[Panacea]

Yes fender, I see what you mean.

But two points in relation to the scenario:

(1) my invoice/bill will show 100 for the job - no VAT - cos that's my price. My competitor, to remain competitive, might also charge 100 total, made up of 83 and 17. He keeps 83, while I get to keep the full 100.

See what I mean, seems a bit unfair!

If you charge €100 the net cost to the customer is €100 HOWEVER if as in your example your vat registered competitor charges €83 net + €17 vat then the net cost to a vat registered customer is €83 and you would therefore be comparatively dearer so the customer would be faced with a choice to incur a cost of €100 or a cost of €83.