Margin scheme question

[Cryptocrystals]

Hello all,

I am new on this forum and have and I have a complicated tax question regarding the margin scheme.

My business sells crystals (antiques), which fall under the margin scheme, which means I have to hold a stockbook with exactly how much profit I made per item sold to calculate the VAT over this profit at 16,7%, which I do.

My business recently also allows other sellers to sell on my webshops (items eligible for margin scheme), they list their item on my webshop and I make sure it gets traffic and gets sold. If the item sells, the money goes to my bank account, this means I get a sales invoice. However since it is not my item, there are no costs involved for me so I do not have a purchase invoice.

An example:
A Chinese seller based in China adds a product to my webshop, this product gets sold and has to be sent from China to Europe, 10 pounds enter my bank account. At the end of the month I send the Chinese seller his 10 pounds. To make it profitable for me I ask them a monthly fee to enable them to sell on my webshop, a fee of 400 pounds per month.

In this example I am not sure on what I have to pay VAT on, because there is no cost involved per item. Because I sell with the margin scheme, and pay VAT over my profit per item, the items from the Chinese sellers do not have any profit as there is no cost and I send them the full amount received minus the fees from the webshop itself.

I simply allow them to sell on my webshop and charge them a fixed fee per month. Legally, Is this a service that I am offering? Do I therefore have to pay VAT over the service at 400*1,20%? Does this mean the orders are excluded from VAT?

I hope any of you can help me in the right direction, I really want to sell the products of others in my webshop without having any costs myself, its convenient, and get paid monthly, but I do not know how to translate it into my taxes...

Thanks in advance,

 

[STDFR33]

Who does the buyer think they are buying from? Is it clear that it’s a Chinese seller?

 

[Cryptocrystals]

It goes through my webshop and Ltd, so the customers are buying from me, it is however displayed that it is shipped from China.

 

[Gyumri]

Have a look here. Any questions then do ask.

Using a VAT margin scheme if you’re an agent

If you’re an agent, find out how to use a VAT margin scheme to account for VAT (VAT Notice 718).

www.gov.uk

 

[Cryptocrystals]

Thank you so much, I did not actually find this page before, that answers some concerns.

My webshop provider charges me processing and transaction fees per sale, these come in at about 10%. If I sell an item for 100 pounds, I see 90 pounds of it. Does this allow me to use the 90 pounds as my amount sold in the margin scheme? Or do I have to use the full 100 pounds, even though I did not get 100 pounds, id be paying tax over money I dont have.

Is it allowed to include expenses that are directly correlated with the sale such as transaction fees from my webshop or payment provider? Or even google ads fees?

For example, I sold something for 100 pounds, I see 90 pounds of it due to the payment provider fee. I then see that this particular item had an adspent on google ads for 20 pounds, can I then deduct this from the 90? If the item would have costed me 20 pounds I would then under the margin scheme declare 70-20 = 50 and then 50*0,1667%

Thank you for your help in advance, I wasnt able to find this anywhere either.

 

[Cryptocrystals]

I know that business overheads are not to be included in the calculation, but I wasnt sure for such a direct expense such as transaction fees.

 

[Cryptocrystals]

It might be worth mentioning these fees are taken in real-time if the sale occurs.

 

[lesvatadvice]

The effect of the legislation on Agents (as per the link provided above) is that you are treated as if you have bought and sold those items, even though you act as Agent. You will therefore be liable to account for VAT on those items.

I am concerned also that you may be liable to be registered under the fulfilment house scheme

Apply for the Fulfilment House Due Diligence Scheme - GOV.UK (www.gov.uk) Penalties for non-compliance are pretty severe, so you should check these rules urgently.

 

[Cryptocrystals]

Thank you for your concern, I do however not hold stock in the UK so it seems I am excluded from the fulfilment scheme.

I understand I am liable for VAT as an agent and I understand according to the law, I buy and sell those items.

My only question remaining is then; can i deduct direct costs correlating to the item sold to the selling price as in my above example? It would be strange to pay VAT over 10% that I never received.

 

[Scalloway]

can i deduct direct costs correlating to the item sold to the selling price as in my above example? It would be strange to pay VAT over 10% that I never received.

Your turnover is the full selling price. The 10% is a cost of doing business.

 

[Cryptocrystals]

Ok thank you for confirming this.

 

[Cryptocrystals]

The transaction fees are deducted before it hits my bank account, therefore I could theoretically use the deducted price as the selling price right? Because I never had my hands on the 10% extra?

Im sorry if this is a dumb question, I am just trying to learn

 

[Cryptocrystals]

HMRC states:

Your margin will be equal to the charges you make for your services as an agent.

So if i charge him lets say, 400 pounds to sell on my webshop per month, do i have to calculate 16.67% over these 400 pounds? And then additionally I have to pay seperate VAT per order I receive as well?

 

[Cryptocrystals]

I already pay 20% VAT over the services and costs my webshop charges me, so If I sell an item online, I pay 20% over 10% of the costs of the item (because 10% are the transaction fees from the webshop). Then in addition I pay 16.67% on the profit of this item, and then lastly I pay 16.67% AGAIN for the SAME items when I charge for the service for being able to sell on my webshop?

 

[kulture]

This is getting more complicated with every question. For something this detailed you really need to sit down with your accountant and go through everything with them. You may find that the contract you have between you and the other retailers as well as the terms and conditions on your website need to be checked and correct so that you can legitimately use the VAT scheme.

 

[Cryptocrystals]

This is getting more complicated with every question. For something this detailed you really need to sit down with your accountant and go through everything with them. You may find that the contract you have between you and the other retailers as well as the terms and conditions on your website need to be checked and correct so that you can legitimately use the VAT scheme.

Thank you, I will do this.