Wednesday, March 07, 2012

the taxman cometh

if you're a member of the Old Maiden Aunt group over on Ravelry, you'll already have seen my announcement about upcoming changes to the web shop sales, but i thought i'd go into it in a bit more detail here (& just in case there's still a knitter in the known universe who isn't on Ravelry yet!!).
by the end of this tax year (5th april 2012), thanks to all my amazing customers old & new, i will reach the “trigger” turnover threshold that will require my business to become VAT registered. this means that as of 6th april, i will be required to charge VAT of 20% on all my UK/EU sales, & immediately pay that 20% over to the taxman (boo!).
this tax will be added automatically in the web shop - all UK/EU customers will unfortunately have 20% tax added to their order total.  i'm hoping to set up the shop to display both VAT and non-VAT prices, so that everyone will know up front how much their yarns will cost (although i still have to figure out how to do this!). i held off on this for as long as i could - i don’t want my customers to pay any more than they have to! - but i’m now legally required to do it.
since i'm also going to be able to claim back the VAT that i'm charged on business purchases (base yarn & dyes, packaging materials, and the always-present mini lovehearts!) this may mean that some of my more expensive base yarns become more affordable for me, and i'm hoping to be able to pass that on to my customers as much as i can.  i've still got to crunch the numbers, but i might actually be able to lower the prices of some of my yarns slightly, which will hopefully help offset the increase caused by the addition of VAT.
i hope everyone understands the price changes.  i haven't made any alterations to my prices since i started trading (apart from the inevitable postage increases when Royal Mail puts their prices up!), and adding VAT won't mean that i'm making any more money than before, as the tax raised goes straight to the taxman.  unfortunately i just can’t afford to absorb the VAT charges myself, so alas, it’s a cost that has to be added into the yarn prices.
let me know if you have any questions - hopefully we can make it through this transition without too many hiccups!

1 comment:

Terri(terdotty on rav) said...

Good luck sorting all the pricing/VAT issues out - great that you're doing so well, shame it leads to more work for you!