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How does that work then
non vat registered
cost 100 + vat = 120 + 50 profit= 170 retail
Vat registered business 120 cost -20 vat =100 + 50 profit + vat = 180 retail
how does the retailer customer win and where is this profit margin hit you mention for the non vat registered business
You are right but a fairer comparison would be in the sales the customer is paying is the same (customer wont care if business is VAT registered or not). Non VAT registered could in theory charge same price but doesn't have to charge VAT
Non vat registered
Cost= £120 (inc Vat)
Sales=£180 (no VAT)
=£60 profit
Vat registered
Cost=£100 (exc VAT)
Sales=£180 (but £30 is VAT)
=£50 profit
This is even worse - non VAT registered earns more profit