VAT on secondhand goods

[Edward Moss]

I've just purchased some secondhand photography equipment, Receipt reads;

Filter holder £35.00
Postage £03.00

Sale Net £36.96
VAT £1.04

Total £38.00

Of course I want to reclaim the VAT but I've no idea how they have calculated the £1.04. I've emailed the shop and they said the VAT is based upon any profit made, not the full selling price, so how do I put it through my accounts?

[kontracta_com]

It reads like that they are part of the VAT margin scheme. Some more info is available on the HMRC website, which I've pasted a link to below, if you want to read up on it.

http://www.hmrc.gov.uk/vat/start/schemes/margin.htm

[David Griffiths]

You cannot claim VAT on goods that are purchased from a seller operating a margin scheme and the seller should not issue a VAT invoice

[spidersong]

You have to put it through gross, if they're selling under the secondhand scheme then their invoice shouldn't actually show a specific VAT amount, it should only have a caveat that its subject to VAT under the secondhand scheme.

Basically with secondhand goods sales the vendor only accounts for the VAT on the profit they make and so if bought for £20 and sold for £43.50 they'd pay over £3.50 (the VAT element of their £23.50 profit) to HMRC.

But using the scheme does mean that they should issue invoices without showing VAT and their customers cannot recover any VAT against those invoices. So I'm afraid that you don't actually have any VAT to recover in this case.

[Edward Moss]

Thanks all, good to know for next time.