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Posted Tue, 14 Mar 2023 20:15:01 GMT by Marie2584
So I’m a UK resident planning on starting my dropshipping business soon. My business model is as follows: I acts as an intermediary between customers from all over the world and the vendor(not sure where my vendor is based just yet). The vendor deals with the shipping and handling, I deal with sending orders over to them and the customer service side of things. I know i have to register my business with HMRC – how do I do this and do I register as a sole trader or a plc? My biggest concern is to do with the taxes: From my research, it appears there are three types of taxes I need to pay: Income tax is relatively straightforward – I just want to know when and how often I pay this tax Then there is VAT I read that I only pay VAT(20%) once my income exceeds £85,000. Is this value profit?? Or gross income? However, I can choose to pay VAT regardless– can I just ask what the benefits of this is? I also want to know at what point do I add VAT to my products? and do I essentially charge VAT and give that amount to HMRC? And at what point can I file for VAT charge backs? Finally, there’s customs duty. I know this is 2. 5%. However I’ve read that this does not need to be paid as long as the value of my product is less than £135. I just wanted to confirm this is true I know I’m asking for a lot of help ha ha, but I just want to make sure that I am not at the short end of the legal stick in the future. Thank you in advance
Posted Mon, 20 Mar 2023 14:58:08 GMT by HMRC Admin 2

If you are making taxable supplies in the UK then you would need to register for VAT once you reach the registration threshold which is currently £85,000.

If you have not reached this threshold then you can register for VAT voluntarily. If you choose to do this then you would start charging VAT straight away on your UK taxable supplies.

Who should register for VAT (VAT Notice 700/1)

VAT would be charged on the full sale of your supply and not on your profit margin. The VAT which you incur can also be reclaimed as input tax which you would then recover on your VAT return.

VAT guide (VAT Notice 700)

Please contact our imports and exports team for advice on customs charges on imports.

Imports and exports: general enquiries

Thank you.

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