VAT on PV systems

[pete433]

Hi

Can anyone explain the basics of VAT on PV systems, I believe that we would charge 5% on the total invoice but can in theory claim 20% on materials. Is this how it works???

Cheers

Peter

 

[t4sltd]

you charge 5% VAT for domestic pv installs but pay 20% on all materials

 

[pete433]

Thanks

Then we just claim the vat payment back on my quarterly return. So it is vat profitable in theory.

 

[U2Singhy]

Not really, you pay the VAT on materials @ 20%, and claim it back on your quarterly return. You then charge the customer VAT @ 5% and pay that to the Guv'nor

 

[pete433]

Yes but if materials are 6000, vat would be 1200 Total (7200), if total invoice was 10000 vat would be 500, so a net vat return figure of 1200-500 = 700.

 

[TedM]

0. Money in bank balance = £10,000
1. Buy materials = spend £7200 (bank balance = £2,800)
2. Do job - get paid = income £10,500 (bank balance = £13,300)
3. Do VAT return - HMRC pays you (£1200-£500) = £700. (closing bank balance = £14,000)

You now have £4,000 more than when you started which is the labour/profit for the job and which is the same £4,000 as £10,000 (ex VAT) you were paid for the job less the £6,000 (ex VAT) you spent on materials.

HMRC are only paying you £700 in a VAT refund because you have already spent that extra £700 in the VAT on your purchases that your customer isn't covering in the VAT that they are paying to you on your bill.

VAT can provide a positive cash flow - but only if the timing is right (and you are slow to pay your bills). But it can just as easily be negative.

 

[pete433]

Thanks TedM

 

[PVFIT]

If you are doing any kind of volume I recommend you move onto monthly VAT returns as the VAT refund value can rack up very quickly. This should help you with cash flow as HMRC will pay you more regularly