You pay VAT on things you PURCHASE, not on things you create. Not all things you purchase attract VAT either, gold and currency for example don't among many other items.
VAT is a way for government to collect tax from the consumer by using businesses to do this. VAT is also 20% not 23% here. If you can claim the VAT back, you can more than likely claim the computer equipment as a capital business expense and get some of the cost back from the tax man too.
Hi Timmers, sounds like you might be in the UK (sorry if I've made a gross assumption here). I've been wondering this for a while and you (or others) may have an accountancy background and may be able to advise. My understanding is that if you're a VAT registered business in the UK then you can buy items for the business without VAT (or claim it back in your quarterly VAT return), but you are then obliged to collect VAT at 20% for any goods or services that you provide to your customers (unless they are also a VAT registered businesses) and fill in a quarterly VAT return for HMRC where all of this is calculated.
I presume that if you are buying mining hardware for your business and your business does not use this to provide a VATable service to a customer then you presumably don't need to pay any VAT (which I think is what you're saying above). You would just need to pay tax on the income that the miner generates for the business. The only danger with this setup might be that if the business is not charging anybody VAT (so not providing any other goods or services) then HMRC might revoke the business' VAT-registered status. If you were to buy a miner without VAT and then sell it to a customer then it's clear that you would need to charge the customer VAT on the price of the miner. Here's the difficult one - if your business buys a miner and then sells shares in that miner (or shares in what it produces depending on your outlook) to customers then do you need to collect VAT on top of the price of the shares that you sell? If the miner technically remains the property of the business, but shares are sold that return a proportion of the miner's output (perhaps with some hosting fee applied by the business) then what part of that transaction is VAT applicable to (is the hosting fee the service)? Any thoughts anybody?
(By the way, when I say "you" above I'm talking about a hypothetical business by the way, not you or anybody else personally)
VAT is a minefield, that's why many businesses in the UK stay under the threshold to avoid the hassle. I think the mining business could be one where it is simple enough and beneficial to be registered though.
My mate is a freelance programmer, he is also his own limited company. He is VAT registered as his turnover is above the threshold.
This makes him more expensive to pay by 20% but as he works for large companies they claim that back...this is what is a the pest, the paperwork for nothing. What is cool though is that all his equipment and allowable expenses are fed to the tax man, and any VAT he pays he can recover. He is a small business and pays an accountant but doesn't need to really.
I asked him about this and was thinking of getting him to pay for my rig, then he could claim back that VAT and some tax relief too. His accountant said no problem. Even with the purpose of this bit of computer equipment being to mine coins..he said the same thing I thought...how would anyone know that? It's office equipment to them and they won't have a scooby doo what a bitcoin is, and even if they did...what amount would they tax you on? He said that the tax man would probably come into it when you made a capital gain selling BTC. Either way they can't check what you have. lol
AFAIK there's no VAT on shares in a company..I've never paid any. If the business was well set up I'd bet that only services provided to customers would attract VAT. I'd definitely consult a decent VAT accountant though. One thing about the VAT man, he's got some really kickass powers and can make a mess of you if you get it wrong.
You can also mitigate that power cost if you're a company. I think a lot of people with big mining setups could do well registering a company for less than 100 quid and registering for VAT and just making a loss ...getting all the perks on what they buy and what power is used. I used to claim 1/4 of my home lecky bill when I was working from there, that's very normal.
