I am a sole trader and so far am not VAT registered. I usually sell my products in retail quantities but am just about to enter a venture where I will be selling my product in much larger quantities to a VAT registered wholesaler.

My question is: If I am selling to a VAT registered customer, do I need to be VAT registered myself? OR is there a way of claiming back the VAT from HMRC after the sale is completed if I stay non-registered?

Any help much appreciated.
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...do I need to be VAT registered myself?
No. However, there may be some advantages in being so.
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thanks
my main concern is that when supplying this customer, removing VAT will squeeze my profit margins to nearly nothing, is there a way I can claim that VAT back from the tax man afterwards?
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You can't claim VAT back if you're not VAT registered.
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Vat should never be part of your business profit! you are a tax collector if you register for VAT - it is foolhardy and financial suicide to include VAT as part of your pricing. You add vat after you have priced your product properly.
sounds as though you should be vat registered so you are on both sides of the equation.
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So basically in order to make the best profit margins I would need to become VAT registered? that way I could buy the product without paying VAT and my customer (who is VAT registered) would not have to pay VAT.
Am I right in thinking that?
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So basically in order to make the best profit margins I would need to become VAT registered? that way I could buy the product without paying VAT and my customer (who is VAT registered) would not have to pay VAT.
Am I right in thinking that?

You would have to pay VAT when you buy the product, but it would be recoverable by offsetting against the VAT that you collect from your customer. The wholesaler would pay you VAT, but can recover it.

You'd lose out on sales to non-registered customers, unless you can put their prices up - in any event I'd expect the prices you charge them to be more than those to the wholesaler. Although you would recover VAT on purchases to service those customers, you be worse off (net) by the VAT on your mark up.

Do the sums to see if the losses on retail are offset by the profits from the wholesale.
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Surely the wholesaler would just pay the VAT and then claim it back, meaning you dont lose anything?
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Why would a wholesaler be getting involved with someone who isn't charging VAT?.

The chances are you paid VAT on the product/products in the first place, so now you are masking that VAT in your price but Mr.Wholesaler can't get at it.

Go VAT registered..../
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I thought the wholesaler would still pay the full price inc. VAT and then be able to claim back the VAT on his purchase, or do both parties need to be VAT registered?
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Only if he has been charged VAT officially by a company with a valid VAT number
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Sorry to take over this thread, but I'm confused now.

Can a VAT registered buyer reclaim the VAT on goods/services purchased from a non-VAT registered supplier?

Matt
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No!!!.

Because if they aren't registered, there is nothing to claim
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A non vat registered person would not put vat on their invoice - so nothing to claim
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Bigmedia.

I am suspecting you have been charging VAT when you shouldn't be, am i right?
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Sorry, I've really got my knickers in a twist with finding out about VAT overseas, and another thread I started about a non VAT paying supplier supplying to overseas clients. Ignore me! haha Sorry if I've confused the hell out of everyone.
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You do have to consider some real issues here.

1. You do not have to register for VAT just because your customer is VAT registered. However, if you are paying VAT on your own purchases, you will not be able to recover it if you are not VAT registered; which will either cause you to increase your prices or will cause your profits to drop.

2. If you register for VAT, your VAT registered customer will simply recover the VAT you charge (as you will on your own purchases) and there will be no actual loss to that customer. Your sales price (for profit-calculating purposes) is the net price, as the VAT belongs to HMRC and not to you.

3. However, if you register for VAT you will have to charge VAT to all you other retail customers. If they are also small businesses without a VAT registration number, they will not be able to reclaim the VAT you charge to them. Again, either your prices simply jump by 17.5% (which your customers might not accept), or you charge the same price, but your profits fall by the VAT element in the sales price. Of course, you will be able to reclaim VAT on purchases so these figures will be reduced to some extent, but you do need to examine the principle in detail (preferably with calculator in hand!).

Comparing 1. and 3. above, you should consider your business strategy. Will you make more from the new large deal than with all your smaller customers currently? Find out how your current customers will react to having a VAT charge added. What is your strategy for the next few years? Do you intend to end up supplying large retailers, or is this a hobby/cottage industry for you?
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