Grain prices creeping up.

[AJA]

What is their postage rate?

I was quoted £15 + VAT DHL next day, but I pick it up as my parents are in Peterborough. On 50kg

 

[Agentgonzo]

Explain please? You can't charge VAT unless you're a VAT registered business. Well you can, but there's no means to pass it on to HMRC. So you'd just be charging 20% more and keeping it.

If you're a small business and not VAT registered, you have to pay VAT on everything you buy. And you will implicitly pay VAT on stuff you sell as part of your end of year tax calculations and that 20% would get handed over to HMRC along with your corporation/income tax

Apart from vat exempt goods (see above difference between exempt and zero rated) VAT should be charged when selling to the end consumer (ie, you the homebrewer, or the grain buying collective). If the person selling you the grain is not doing this, they are dodging taxes which is illegal.

 

[Agentgonzo]

Vat is only payable by a business after passing certain thresholds.

It's handled differently after passing certain thresholds. It's still payable

 

[The Baron]

Hi AJA do you have to a business and if not what is the minimum order?

I was quoted £15 + VAT DHL next day, but I pick it up as my parents are in Peterborough. On 50kg

 

[Agentgonzo]

How did i break the law

See above. If you didn't pay VAT on the grain you bought for homebrew, then you're not paying tax and that's illegal.

Most likely, you did pay VAT but just didn't notice it. (It's unclear here whether you bought from the collective, or you bought from the grain supplier whilst organising the collective)

 

[AJA]

No minimum, subject to the bags being 25kg, and 5kg for hops.
And you don't have to be a business. A few on here have used them.

 

[MickDundee]

@Agentgonzo I think either you are getting confused with VAT or you aren’t putting your point across very well.

If you are a VAT Registered organisation, you charge VAT on anything VATable that you sell and pass it on to HMRC as part of your VAT Return every month/quarter (depending on size/type of business). Any VAT you are charged by your suppliers gets paid to the supplier, but then you reclaim that from HMRC with your monthly/quarterly VAT Return.

If you are not VAT Registered, you do not charge VAT on your sales regardless of whether it’s standard rated for VAT purposes or not. You would incur VAT on your purchases but (on the whole) it’s the responsibility of your supplier to get the treatment correct. You would not be able to reclaim the VAT from HMRC so effectively you are paying 20% more for your VATable purchases than someone who is VAT registered.

Your Annual personal/corporation tax return doesn’t involve VAT at all.

 

[Agentgonzo]

@Agentgonzo I think either you are getting confused with VAT or you aren’t putting your point across very well.

If you are a VAT Registered organisation, you charge VAT on anything VATable that you sell and pass it on to HMRC as part of your VAT Return every month/quarter (depending on size/type of business). Any VAT you are charged by your suppliers gets paid to the supplier, but then you reclaim that from HMRC with your monthly/quarterly VAT Return.

If you are not VAT Registered, you do not charge VAT on your sales. You would incur VAT on your purchases but (on the whole) it’s the responsibility of your supplier to get the treatment correct. You would not be able to reclaim the VAT from HMRC so effectively you are paying 20% more for your VATable purchases than someone who is VAT registered.

Your Annual tax return doesn’t involve VAT at all.

That's put it better than I did. I think I just put my point across badly.

But if you are not VAT registered, even though you do not charge VAT on your sales you still need to pay VAT on it

https://www.theaccountancy.co.uk/vat/vat-registration/sole-trader-need-register-vat-7510.html
"The first step is working out which rates of VAT apply to your business and the goods you sell. This is so that you charge the right amount of VAT

You must charge the correct amount, which in most cases will be 20%. This can affect how much profit you make on each sale, if you must pay your VAT bill. As a result, you might want to add VAT to your existing pric

You must also show the VAT information on your invoice to the customer and on your VAT Return to HMRC. You may be able to reclaim the VAT you’ve paid on goods or services related to these sales
."
(As far as I remember, the rules for sole traders are the same as non-vat registered business).

I think I'm not helping this conversation though. My point is that VAT should always be charged on your bag of grain as it goes along the chain from supplier all the way to the end consumer (you, as the homebrewer). If it's not, then the taxman will come chasing!

 

[MickDundee]

That's put it better than I did. I think I just put my point across badly.

But if you are not VAT registered, even though you do not charge VAT on your sales you still need to pay VAT on it

https://www.theaccountancy.co.uk/vat/vat-registration/sole-trader-need-register-vat-7510.html
"The first step is working out which rates of VAT apply to your business and the goods you sell. This is so that you charge the right amount of VAT

You must charge the correct amount, which in most cases will be 20%. This can affect how much profit you make on each sale, if you must pay your VAT bill. As a result, you might want to add VAT to your existing pric

You must also show the VAT information on your invoice to the customer and on your VAT Return to HMRC. You may be able to reclaim the VAT you’ve paid on goods or services related to these sales
."
(As far as I remember, the rules for sole traders are the same as non-vat registered business)

I’m still not sure if you’re trying to say that businesses that aren’t VAT registered still have to charge VAT. That is not the case.

The bits of article you have quoted is only if you are VAT registered, and the first 3 paragraphs set out the circumstances in which you need to register.

If you aren’t VAT registered then you don’t need to do anything separately with VAT (apart from monitoring whether you are going to exceed the registration threshold and/or whether voluntary registration would be beneficial).

Specifically you shouldn’t charge VAT on any of your sales invoices as this can cause issues with your customers and with HMRC.

 

[Agentgonzo]

I’m still not sure if you’re trying to say that businesses that aren’t VAT registered still have to charge VAT. That is not the case.

I thought that was the case. I stand corrected. (I'm still confused by this as it sounds like the taxman is missing out on tax here)

 

[Stu's Brews]

(I'm still confused by this as it sounds like the taxman is missing out on tax here)

The taxman is missing out if the grain seller is VAT-registered and isn't charging the associated VAT for selling grain to the group buy collective.

That wouldn't be the fault of the group buy collective, that is solely down to the seller to know whether they need to charge VAT. That is unless the group buy collective were knowingly deceiving the grain seller by with-holding the information about the intended usage being for homebrewing (which I would assume they are not).

If the grain seller is not VAT-registered (which you can choose to be if your taxable turnover is less than £85,000 a year) then they do not need to charge VAT when selling the grain.

 

[Cheshire Cat]

I thought that was the case. I stand corrected. (I'm still confused by this as it sounds like the taxman is missing out on tax here)

So we members of the cooperative are not breaking the law

 

[Agentgonzo]

So we members of the cooperative are not breaking the law

Nope! I got that wrong. Sorry.

Though I am curious as to how you're not paying VAT on the grain. I would assume that any grain supplier in the UK would have a turnover above the VAT threshold and thus charging VAT.

 

[Cheshire Cat]

No problem, I thought we were.

 

[chopps]

Nope! I got that wrong. Sorry.

Though I am curious as to how you're not paying VAT on the grain. I would assume that any grain supplier in the UK would have a turnover above the VAT threshold and thus charging VAT.

I would expect at the various points in the supply chain that it's on the seller of the product to determine if VAT needs to be applied by them. Is it really on the homebrew buyer to make that determination? I don't know. Doesn't feel like it should be. Buying grain for our business from the various maltings, I am asked to verify that we're an actual brewery when the account is set up. That's them being diligent and I then get zero rated invoices. But if I wander into a local brewery as an individual to buy a sack of grain from them, for homebrew use or not, and they themselves are not VAT registered there's not really an easy way to manage it.

 

[Agentgonzo]

I would expect at the various points in the supply chain that it's on the seller of the product to determine if VAT needs to be applied by them.

As I understand it (which is more and more looking like it's wrong ). VAT is a tax on the sale of all goods, but collected at point of sale by the vendor on behalf of HMRC. It's then paid back (after netting off other VAT paid by the vendor) to HRMC with tax returns. So the above makes sense that the vendor determines the VAT to be applied (and if they get it wrong, gets fined).

Is it really on the homebrew buyer to make that determination? I don't know. Doesn't feel like it should be.

Probably not.

I would expect at the various points in the supply chain that it's on the seller of the product to determine if VAT needs to be applied by them. Is it really on the homebrew buyer to make that determination? I don't know. Doesn't feel like it should be. Buying grain for our business from the various maltings, I am asked to verify that we're an actual brewery when the account is set up. That's them being diligent and I then get zero rated invoices.

I wonder what the local grain group did in this regard. If at any point it was said that it was for an actual brewery, and it's being sold on to homebrewers, that's probably misrepresentation/fraud on a small scale (though so small they probably won't care).

But if I wander into a local brewery as an individual to buy a sack of grain from them, for homebrew use or not, and they themselves are not VAT registered there's not really an easy way to manage it.

My best guess at this point (which is probably wrong again) is that HMRC would take a dim view on this, as they are essentially missing out on tax on the bag of grain. I would expect that either VAT should have been paid by the brewery when they bought the grain and HMRC would be happy at this point. Or that the brewery doesn't pay VAT on the grain (like FP) but HMRC are still happy because they collect excise on the brewed booze at the end. I would expect that technically the brewery shouldn't be selling on the grain like that. Again, a wild guess.

 

[AJA]

I know less about VAT law, but enough about pensions law to know that the tax manuals are to be treated literally. And this one is definitely one of the clearer examples.

For VAT to be payable, the malt would have to be retail packed. A pallet load of grain sold to the co-op would not meet this. When the co-op operator sells on the malt, he isn't vat registered, so doesn't have to consult the manual.

The other case that I mentioned (pet food) does have much more press and has been tested. It's the marketing that is key. If pet food is formulated for working dogs and is sold as only suitable for working dogs, it is Vat exempt. Lots of manufacturers abuse this (e.g. Aldi/Lidl) but It's not for the shop owner to vet the buyer's dog.

On breweries selling malt, I understand many would not do this lest they get accused of bootlegging, a much bigger issue than a technical VAT interpretation.

 

[The Baron]

My understanding is that the co-operative has told the suppliers it is for homebrewers as they have had complaints from Homebrew shops that they should not be supplying them as it is taking their revenue in that case the suppliers are fully aware that is what is happening.
The Co-operative would have to be selling/passing on the grain to the Vat threshold which is in the region of £85,000 before any Vat has to be paid to the HMRC.
In this case the only people that could have possibly done and I say possibly is the suppliers as it is their responsibility as I presume they are well over the £85,00 vat threshold to make sure it is paid if applicable and not the co-operative as their turnover is well below the Vat threshold

 

[AJA]

My understanding is that the co-operative has told the suppliers it is for homebrewers as they have had complaints from Homebrew shops that they should not be supplying them as it is taking their revenue in that case the suppliers are fully aware that is what is happening.
The Co-operative would have to be selling/passing on the grain to the Vat threshold which is in the region of £85,000 before any Vat has to be paid to the HMRC.
In this case the only people that could have possibly done and I say possibly is the suppliers as it is their responsibility as I presume they are well over the £85,00 vat threshold to make sure it is paid if applicable and not the co-operative as their turnover is well below the Vat threshold

That is correct. And the suppliers would have to make a judgement on the wording of the tax manual. IMO, they are in the clear, even if the end customer is a homebrewer because of the precise wording. I do however sympathise with the grumbles of the retailers who are compelled to add VAT like Maltmiller.

 

[MickDundee]

That is correct. And the suppliers would have to make a judgement on the wording of the tax manual. IMO, they are in the clear, even if the end customer is a homebrewer because of the precise wording. I do however sympathise with the grumbles of the retailers who are compelled to add VAT like Maltmiller.

I think even if they had a VAT inspection, unless the grain cooperative had the word “Homebrew” in its name somewhere HMRC would be highly unlikely to pick up on it.