VAT question on no profit sales

[Pistom]

We are buying a product in the UK and selling overseas so our sale will be zero VAT rated and selling at net purchase price.

As a VAT registered company, can we still reclaim the VAT element?

Does the fact that we don't intend to make a profit make any difference?

I assume this would not be an issue as businesses can sell at a loss and claim VAT back but wanted to make sure I'm not missing anything as we're not used to not marking up bought in items and we know we are not making anything (it's actually in effect a loss) as we are profiting elsewhere.

[Eric Mc]

Pistom said:

We are buying a product in the UK and selling overseas so our sale will be zero VAT rated and selling at net purchase price.

As a VAT registered company, can we still reclaim the VAT element?

Does the fact that we don't intend to make a profit make any difference?

I assume this would not be an issue as businesses can sell at a loss and claim VAT back but wanted to make sure I'm not missing anything as we're not used to not marking up bought in items and we know we are not making anything (it's actually in effect a loss) as we are profiting elsewhere.

VAT is not profit related.

If you are already VAT registered but also make Zero Rated sales, you are still able to reclaim Input VAT on your costs.

If you also make VAT EXEMPT sales, then there might be restrictions on the amount of Input VAT that you can reclaim.

[Panamax]

Pistom said:

...we are profiting elsewhere.

It depends where this "elsewhere" is.

So long as the company is seeking to make a profit overall and is trading on a commercial basis there shouldn't be any issues.

But if you're just using this company as a vehicle to wash away some VAT while making profit in another company or business that isn't VAT registered you're digging a deep hole to fall into.

[Whoozit]

Also consider the working capital implications of having that 20% tied up for up to four months.

[Pistom]

Many thanks everyone. We're happy to stump up the other commercial costs but as long as HMRC don't pick on us for it, we're fine with that.