eBay Reselling Used Clothing - VAT Margin Scheme

Discussion in 'Accounts & Finance' started by Dave0108, Nov 4, 2015.

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  1. Dave0108

    Dave0108 UKBF Contributor Free Member

    52 1
    Hi

    I have a simple question to anyone who is familair with how the 16.67% VAT Margin scheme works on used good, (clothing in this case).... regarding what is the correct way the VAT to be paid is calculated.

    Which is correct?

    ..... If I buy a used Jacket for £50 and then sell it for £90 + £10 postage and packing... by the time I paid eBay fees. PayPal fees, packaging costs and postage... I will be left with £75... which gives £25 profit...

    Do I pay 16.67% on £50 difference between initial purchase cost and final sale price?....... or.............

    Do I pay 16.67% on £25 profit? ........because that is my actual profit....
     
    Posted: Nov 4, 2015 By: Dave0108 Member since: Oct 16, 2015
    #1
  2. Scalloway

    Scalloway UKBF Legend Free Member

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    Then I would say your profit is £40
     
    Posted: Nov 4, 2015 By: Scalloway Member since: Jun 6, 2010
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  3. antp__

    antp__ UKBF Regular Free Member

    175 25
    You pay it on the different as far as i'm aware? So you would pay it on the £50.

    Example
    You buy a work of art for £1,500 and sell it for £2,000. Using a margin scheme, you pay VAT at 16.67% (one-sixth) on the difference: £500. This means you’ll pay £83.33.
    https://www.gov.uk/vat-margin-schemes/overview
     
    Posted: Nov 4, 2015 By: antp__ Member since: Mar 30, 2014
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  4. Energise Accounting

    Energise Accounting UKBF Ace Full Member

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    you pay on the sales price - purchase price in your case £90-£50= £40 which will be £6.66
     
    Posted: Nov 4, 2015 By: Energise Accounting Member since: Sep 24, 2014
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  5. lesvatadvice

    lesvatadvice UKBF Regular Free Member

    738 110
    You should also look at the Global Accounting scheme, a version of the margin scheme, which will simplify your record keeping, and mean you do not need to work out the profit on an item by item basis.
     
    Posted: Nov 4, 2015 By: lesvatadvice Member since: Jul 7, 2011
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  6. antp__

    antp__ UKBF Regular Free Member

    175 25
    @Energise Accounting I have a question that I would like to know if possible. In this instance they are selling it for £90 + £10 postage so would the total sale price be £100? Minus £50 leaving you with £50, or does the £10 postage not get added on as the item price is £90?
     
    Posted: Nov 5, 2015 By: antp__ Member since: Mar 30, 2014
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  7. Energise Accounting

    Energise Accounting UKBF Ace Full Member

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    As far as I am aware The VAT is worked out on the sale of the actual goods - purchase price of goods.

    As @lesvatadvice has suggested it may be easier to use the global accounting scheme for your type of business.
     
    Posted: Nov 6, 2015 By: Energise Accounting Member since: Sep 24, 2014
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  8. David Griffiths

    David Griffiths UKBF Legend Full Member - Verified Business

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    I agree with Energise that the VAT is worked out on the item price. However, in practice it wouldn't make any difference. The £10 postage charge is subject to the same VAT as the goods, so there would be VAT of 1/6 on the £10 when accounted for separately.
     
    Posted: Nov 6, 2015 By: David Griffiths Member since: Jun 21, 2008
    #8
  9. antp__

    antp__ UKBF Regular Free Member

    175 25
    Posted: Nov 6, 2015 By: antp__ Member since: Mar 30, 2014
    #9
  10. Dave0108

    Dave0108 UKBF Contributor Free Member

    52 1
    Firstly, many thanks to those who contributed. Very useful information indeed.

    I can see that the Global Accounting Scheme would work for me perfectly. I am eligible under all criteria. However there will be a serious record keeping problem.....

    All the items I would buy would be from different private sellers on eBay.....

    HMRC wants to know sellers address, but this information is guarded by eBay and is NOT available. How am I to get addresses from all the sellers if I am expecting to be buying over 100 items per month.... also a majority of people would probably not want to give their address away... do I just put a random address in and hope for the best? .........................

    There will also be their name, account name and email address which I do have access to, maybe that would be enough. I am doubtful HMRC will be checking the records to the extent where they would go around the houses asking people "Did you sell your used jeans for £5 to this person via eBay 2 years ago"? This is laughable.... besides people often move in this day and age

    "15.3 What details must be included on purchase invoices?
    The following rule/requirement/paragraph has the force of law
    Purchase invoices must include:
    • your name and address
    • the seller’s name and address
    • invoice number
    • date of transaction
    • description of goods (this must be sufficient to enable us to verify that the goods are eligible for Global Accounting, for example ‘four tables, ten chairs’ - ‘assorted goods’ is not acceptable)
    • total price, you must not show VAT separately"
     
    Posted: Nov 7, 2015 By: Dave0108 Member since: Oct 16, 2015
    #10
  11. Hash and Bash

    Hash and Bash UKBF Regular Free Member

    308 55
    That is clear then - you can't use the Global accounting/margin scheme for those items as you do not have the seller's name and address.
    You would have to account for 20% vat on the full selling price of the items.
     
    Posted: Nov 7, 2015 By: Hash and Bash Member since: Nov 8, 2012
    #11
  12. k100danny

    k100danny UKBF Regular Free Member

    449 48
    Just a quick tip, you plan to break the vat threshold by buying and selling used clothing through ebay on a single item basis? This would be very time consuming as far as your buying goes. Don't get me wrong you can buy items and resell on ebay at a profit (this is exactly how i got into business 10 years ago) But once you start selling quite a few items sourcing and reselling in this way is not worth doing.

    Have you thought of finding a supplier who can supply you with good grade A used clothing? many of them do deal in high end brands also, buying in bulk means you have more time to focus on your business. This is exactly the problem I found, lots of work for very little money (trust me) This was why I started contacting grading houses across europe, the USA and japan and buying in bulk. If you are a retailing your focus should be on selling whereas doing it your way you will be spending 95% of your time buying with no guarantee of winning the item at a profitable price.

    This post wasn't slating your business idea because it's exactly how i started in business but after 3 months it was not viable in that way. We now bring around 20 tonnes of used clothing and textiles into the country each month but i have a feeling based on your item price you are looking at selling specific brands etc maybe as a passion project but business wise, trust me buying in bulk is far easier.

    I may be able to help you with sourcing depending on what you are looking for.
     
    Posted: Nov 7, 2015 By: k100danny Member since: Oct 23, 2013
    #12
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