Queries as a dropshipping business owner

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

Hi,

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.

Hello, I have recently set up an e commerce store which operates on a dropshipping model. I list products on my online store without the handling inventory or fulfillment. The product gets delivered straight from the supplier to the customer. Non of the products I sell are stored in any warehouse located in the UK. My business is based in the UK and I have a few questions regarding tax. 1. For example, if a customer from USA or EU or any other country abroad orders from my website and the product gets delivered from supplier in china to the overseas customer will there be any tax to pay to the UK government and to the overseas government of the country the product is getting delivered to? 2. Would I need to charge tax on products to countries abroad I make my products available in? 3. If I choose not to register for VAT since I have not met the threshold, would I simply charge no tax on the products I sell in the UK? 4. I am a sole trader, when would I be required to register my business?

Hi rom,
In answer to your question 
Points 1 and 2 Your queries regarding your business would be covered by the following guidance -
VAT and overseas goods sold to customers in the UK using online marketplaces

Point 3 - Sales  arising in the UK, would have to have VAT added to the sale.  You can claim the VAT as an Expense on SA103F, when completing your self assessment tax return.
Point 4 - You will need to register as a self employed sole trader in the tax year that your gross turnover exceeds £1000.  
You can do this at Set up as self-employed (a 'sole trader'): step by step
Thank you.