Margin VAT question

[fbrown91]

Hi,

Thank you looking at me question!

I am currently researching about starting an import business (skincare from outside the EEA - Japan/ South Korea). I have seen alot of the other businesses doing the same are only charging their customers a VAT rate of 16.67%. I am guessing they are only charging a Margin VAT? From what I understand, it is the VAT rate (16.67%) applied to second hands goods, and its also applicable when you dont pay VAT on your purchases from a wholesaler who is not obliged to charge VAT, for instance when you purchase from outside the EEA etc (youtube info).
I understand that I dont need to be VAT registered atm, but I would like to know how it works once VAT registered, especially when I am claiming VAT on my business expneses?
Can I claim the VAT when on a Margin VAT scheme?
If yes how much? 16.67% or 20% ?

I hope this makes sense! I have looked everywhere regarding this scheme, unfortunetly was unable to find any clear explanation.
Thank you for taking time to reply to this.

 

[Gyumri]

Hi,

Thank you looking at me question!

I am currently researching about starting an import business (skincare from outside the EEA - Japan/ South Korea). I have seen alot of the other businesses doing the same are only charging their customers a VAT rate of 16.67%. I am guessing they are only charging a Margin VAT? From what I understand, it is the VAT rate (16.67%) applied to second hands goods, and its also applicable when you dont pay VAT on your purchases from a wholesaler who is not obliged to charge VAT, for instance when you purchase from outside the EEA etc (youtube info).
I understand that I dont need to be VAT registered atm, but I would like to know how it works once VAT registered, especially when I am claiming VAT on my business expneses?
Can I claim the VAT when on a Margin VAT scheme?
If yes how much? 16.67% or 20% ?

I hope this makes sense! I have looked everywhere regarding this scheme, unfortunetly was unable to find any clear explanation.
Thank you for taking time to reply to this.

See if this link helps :

What is a VAT margin scheme?

A VAT margin scheme is used to tax the difference between the amount that a business pays for certain items and the amount that it later sells those items for.

www.freeagent.com

 

[japancool]

I think you may be misunderstanding VAT.

Are you suggesting that, for example, on a £12 product, the VAT element is £2 (i.e. 16.67%)? That's correct, because you add VAT to the ex-VAT price. That is to say, you add 20% to £10 to arrive at £12.

 

[MOIC]

You add 20% to the cost price to calculate the selling price including VAT. (10.00*1.2 = 12.00)

You multiply the selling price by 16.67% to calculate the VAT from the selling price. (12.00*16.67/100 = 2.00)

 

[NicoJ]

With the margin scheme you calculate VAT on the difference (profit you make on each item). So, say you buy a vehicle for £1000 and then sell it for £2000, you would calculate output VAT @16.67% on £1000.

You claim input VAT on any other expenses you incur as normal so the 20% that you are charged.

It does depend on what you are buying however, just because you are not charged VAT on an import doesn't mean that it is eligible for the margin scheme.
I don't believe skincare products would qualify.

 

[lesvatadvice]

the margin scheme is available for the sale of second hand goods. From your description, the goods being imported are not 'second hand.'
If you expect to import regularly, you should join the Customs Declaration Service, which allows you to use the Postponed VAT Accounting scheme (PVA).
Arrange a meeting with your Accountant to work through these questions and crunch some numbers.