VAT Threshold increase question

[btr.style]

So it seems the VAT registration threshold is now 90k. 

Does this now mean that it's 90k over the last 12 months (including the months when it was 85k) or is it something that will only be beneficial next April when sales in the prior 12 months is when the limit was upped to 90k. 

If it's the former, have eBay's systems updated so if you now exceed 85k (but under 90k), it doesn't ask for a VAT number to carry on selling? 

[boo-vinyl]

It's definitely a rolling 12 months but don't know if it's daily , weekly or monthly but 100% not year to year 

[btr.style]

If we say on the rolling 12 month basis it's the month of April to March. As the increase kicked in on the 1st April, does it suddenly mean the month of March 2023-April 2024 can't exceed 90k or will it mean the month of April 2024-March 2025 can't exceed 90k? 

It's a bit of an odd one that's never explained. Would it even be as the months roll on an extra £416 can be earned a month (£5k divided by 12). 

[magpiecorner1]

If you are not VAT registered at the moment, but your VAT turnover is going to be over £90,000 by the end of this month, you have to register.  So if you reach over £90,000 by 30 April, you have to register within 30 days after that, so that your VAT registration begins 1st June.

Note though that it might take more than 30 days to actually get your VAT registration, so if you are certain you will be going over, register now for 1st June registration date, otherwise you are VAT no man's land and legally shouldn't be trading.

A rolling 12 months means that the calculations are done monthly.

[81naut_51 · Accepted solution]

I would expect if your tax year runs from 1st April to 31st March each year:

01/04/23 - 31/03/24 = 85K

01/05/23 - 30/04/24 = 90K

Below is also a rolling 12 month period (abeit mid month)

15/04/23 - 14/04/24 = 90K

20/04/23 - 19/04/24 = 90K

The rolling 12 month period can be worked out per day but most people will check at the end of each month for ease. If you are close-ish to the VAT threshold then perhaps check twice a month or weekly if you wish to stay below.

[btr.style]

Excellent thanks. Obviously the confusion was that even though it's kicked in, I didn't know if it would have been something which included the prior period. As that prior period was when it was 85k. 

So now the question is....... Can dave@ebay confirm that eBay's systems have been updated to represent this? So if someone exceeded 85k (but under 90k) in the prior 12 months from now, they'd not be forced to provide VAT number because eBay's system still has the old 85k figure as the threshold. 

[magpiecorner1]

It has nothing to do with when your tax year ends  and its worked out monthly, not to the day - hence VAT registration always starting on the first of the month following the month you have exceeded the limit.  So no need at all to check weekly.

The limit is £90k, so reaching the £85k now has no bearing on VAT registration.  Was a time the VAT registration increased every year, so its not complicated.

Anyway, all tax years are being moved to the same year end, so a moot point.

[sheba-knows-best]

Just to clarify - as soon as the new limit comes in... is it kind of back-dated? What I mean is.... at the end of May 2024 am I allowed to go over 85K for the year rolling (ie 1 May 2023 - 31 April 2024 is allowed 90k). The reason, I am unsure is that 11 months of the money would have been earned under an 85K limit. 

I hope this makes sense.

I suspect I'm over-thinking it. So from 1 April 2024 I am allowed 90k in the previous 12 months right?

@magpiecorner1 

[papso22]

On the basis of the rolling 12 months, at the end of March 24 you used 85,000 as the threshold, at the end of April 24 you use 90,000.

[magpiecorner1]

You're overthinking it.  The amount from now on is £90K, that's now the only figure to consider.  Now £90k is the rolling total over the previous 12 months.

I thought of you when I read this, not an amazing increase, but every little will help you!  Not even on my radar, even though our two businesses will shortly have the same year end - which was always a great reason for being seen as two businesses by one couple, as well as the fact that we have both been self employed for so long - but I think we are too well established for it to be a concern.

[magpiecorner1]

I would add though, if  I was as good as you and a few years younger, I'd take a long hard look at the pros and cons of being VAT registered, I think if you really wanted to, you could create a huge business.   I get the impression you are hogtied a wee bit by the threshold.

Though, as a small business, I've only ever employed a couple of people, though used a lot of other small businesses.    I prefer being a one man band with no monies owed and no monies owing - only compromise is listing for other half's business and having him deal with all my post - but good swap, I think.

[typo_lee]

Worth considering the flat rate VAT scheme as well. Very simple to calculate your VAT and you can claim 4 years VAT on your first return thereafter you can't claim any VAT back only pay it to the tax man albeit at a very small rate of 7.5% if your an e-commerce business 😊 

[therenewalworkshopltd]

Claiming the VAT back for the previous period, is not as rosy as you make it sound.

You can only claim vat back on the stock you currently hold, not stock that has been sold previously.

And if considering the flat rate scheme, you need to do the calculations.

If you have a lot of expenses, then it's virtually guaranteed to be better, to use standard VAT.

Flat rate ends up paying pretty much the same as standard, though it can swing either way, depending on your circumstances.

The biggest advantage to is, is the simplification and that's really about it.  Frankly though, VAT is really not that complicated at all.

[typo_lee]

You can claim the VAT back also on machinery etc bought within the past 4 years. And services the last 6 months can be claimed so for example if your eBay fees are high (such as ours) that's a big lump due for a refund. 

[magpiecorner1]

I think it's a difficult choice, though if I were considering VAT registration I'd lean towards the standard scheme if selling new goods and the flat rate for used, if I wasn't paying VAT, or very little VAT, on purchases of stock.

Though I m not an expert, my experience of VAT is B2B, and being standard  VAT registered business to business regardless of turnover is a no brainer, as it's merely a minor chore and doesn't affect pricing.  A whole different ballgame.

[therenewalworkshopltd]

And how many Ebay business', that are basically younger business's pre vat, have machinery etc that they claim VAT back on?  Come on, really?  The only realy thing is likely to be a computer, or maybe some sort of packing machine etc.  But certainly not much!

As regards your Ebay fees, you are really treading on thin ground with that one.

I would strongly advise anyone considering doing that kind of thing, to speak to an accountant first.

Services, are not really Ebay, though I'm sure that certain fees, such as the monthly "service" fee would come under that umbrella.  But selling fees, I seriously doubt!

And if you get it wrong, you have to pay it back, with possible penalties!

Are there any exceptions on reclaiming VAT?

Not all goods and services are eligible for VAT, so there may be some purchases where you have nothing to reclaim. There are also restrictions on goods that you’ve already used up, such as petrol or electricity, and goods that you sold or supplied before you registered for VAT.

Exceptions also apply for the VAT on any services which relate to goods that you disposed of before becoming VAT registered.

[typo_lee]

Bit patronising somewhat? I have loads of machinery as thats the nature of what we sell on all marketplace platforms and its very expensive so well worth the VAT reclaim.

Regarding seller fees and claiming VAT back this was lifted straight off Google:

'Paying VAT on eBay seller fees However, when your business is VAT registered you can claim back the VAT that you pay on your eBay fees. Find out more about reclaiming VAT here.'

So the advice your giving out is totally incorrect.

[therenewalworkshopltd]

Not meant to be patronising, but I've gone through the process and know exactly what I can, and cannot claim for.

But seriously, if you are turning over less than 90k per year, then there really aren't many that will have loads of machinery.   There are obviously exceptions to this, as you must have label makers etc.

If you do have a lot of machinery, then you are the exception and not the usual candidate.
But again, in the main, someone who is buying and selling ordinary stock, will NOT have a lot of machinery.

I would suggest that you look at HMRC and not websites in general for your information, as it is invariably out of date and possibly wrong.

And I never said that you couldn't claim Ebay fees, but that you are on very dodgy ground when doing so.

However my statement still stands, you need to speak to  an accountant when doing this, or you can find yourself in a lot of trouble!

[typo_lee]

I can assure we do speak to an accountant who is chartered and its very clear from multiple sources inc. HMRC and the GOV.UK website that ebay fees CAN be claimed back.

[magpiecorner1]

I think you are correct, though only for the previous 6 months.