Whilst the tasks can't take into every single cost in setting up the candidates businesses for the most part these are fixed or equal between the team and so are rightly ignored.

However on this task as the winner was decided by profit not sales I think that Adam's Team should have won.

Selling Hot Food attracts VAT at 20%.

Adam's Team
Sales: £388.29
VAT @ 20% : £77.65
Spent: £90.25
Profit: £220.39

Jenna's Team
Sales: £588.60
VAT @ 20% : £117.72
Spent: £268.82
Profit: £202.06

Tom's idea of Sushi was absolutely the best choice business wise as cold food does not incur VAT.

The point is to find someone business savy, the fact that no-one on the teams mentioned there was a way to increase profit by 20% is poor.

If the they did and the BBC edited it out this is dumbing down and disappointing.

They would not be charging VAT as they will be under the VAT threshold - unless their VAT taxable turnover is greater than £77,000

ah, ok. That blows that theory out of the water then!

As Eittol96 pointed out VAT registration is not required uless turnover reaches £77,000 but even without taking this into account your calculations are incorrect.

The nett price is 100%. The VAT is 20% giving a selling price of 120%.

Thus Adam's gross sales of £388.29 divided by 120 and multiplied by 100 give a nett figure of £323.57 and VAT of £64.71. You can check this by multiplying £323.57 by 20%.

Jenna's gross sales of £588.60 divided by 120 and multiplied by 100 give a nett price of £490.50 and a VAT amount of £98.10. Again check by multiplying £490.50 by 20%.

The mistake you made is actually quite common and even using the correct calculation Jenna would come out slightly behind Adam, but I imagine we're all agreed that they'd struggle mightily to achieve figures requiring VAT registration.

Adam's team would still have lost for ignoring the brief, and serving up cheap crap.

VAT is part of a business's turnover not it's profit. It is collected by the business on behlaf of HMRC and must be paid to them. Suerly on this basis it would not affect the profits made?

If a company is trading below the £77000 threshold and therefore not registered for VAT they will not charge the tax to their customers. However if they don't keep a careful eye on turnover and it exceeds the threshold HMRC are entitled to apply the tax retrospectively and the profits will certainly be massively affected.

If the turnover has gone over the threshold on a temporary basis a business can apply for an exception but this will only be granted at the discretion of HMRC.

The following from the hmrc website might help for further understanding.

Many a business failing to register for VAT has been plunged into bankruptcy.

Exactly. It makes no difference to the profits at all.

syncage - you're fired!

Even in the case of the 'sushi / cold take away' option I think you would still have to pay VAT at the full rate on any ingredients supplied to you (for catering). If you are not VAT registered you have no way of directly claiming this back in the way VAT registered business can, so in some respects this could be seen as a disadvantage.

If you were a small 'street' sushi business you would have to pass the costs on to the customer and claim the VAT paid as business expense at the end of your accounting year, in some ways that affects your profit more adversely than just passing the VAT on to the customer - it depends on how you run business. Not sure if you can claim the VAT back directly off the VAT man in that scenario, but obviously the cost of employing an accountant to do so may outweigh the amount of money got back depending on the nature, turnover etc of the business.