Small sole trader - second hand goods - vat

[Shuggydiamonds]

My stock is mainly purchased from uk auction houses which I’m paying a lot of VAT on.

reselling through eBay to uk,eu, worldwide

I’m below 77k for vat but would like to register to benefit (hopefully) by paying circa 20% less for every purchase I make. Thousands of £ a year potentially.

should I?

Can I claim on all my old auction receipts? (How would that work?)

If I would be using the margin scheme, can I use a simplified form of book keeping to average out vat payable on profit? i.e general 15% profit margin per item.

I’ve tried to do my reading on this, please forgive me if I sound naive or clueless.

thanks in advance for any advice

 

[NicoJ]

You won't pay 20% less. You may be able to reclaim input VAT to offset VAT charged but that depends on some variables.

If you still have the goods as stock then you may be able to reclaim the VAT, although I'm not sure if auction fees are classed as a service which presumably are expired.

There are a few different schemes you can take advantage of, but the best advice is to speak to your accountant as they will be best placed to advise on all these issues.

 

[Shuggydiamonds]

Hi Nico,

I’ve not got an accountant. business gateway are not really up on this area either.

I have done some research and hit a dead end.

 

[NicoJ]

VAT is one of the most complicated taxes, if you get it wrong it could cost you the business. If you are turning over around 77k (its compulsory to register at £85k) then a good accountant will be well worth investing in.

Researching yourself can lead you down a rabbit hole, advice on a forum can end up being more confusing than helpful. The best thing to do is book an appointment with an accountant (usually they have a free 1/2 hr intro meeting) and go through the facts and figures of your business.

 

[Shuggydiamonds]

Ok. I will bite the bullet and speak to an accountant!

I don’t think I’ll be near 77k for a couple years yet at least so hopefully I can obtain the advice I need to enable me to operate without an ongoing accountancy fee for now.

 

[paulears]

Most accountants will save you more than they charge you - that's what mine promised me and looking at the year end paperwork - I have no idea what some of the figures even are. I'd not have put them in the accounts if I prepared them myself.

Once you are registered, and input tax in your costs for stock get offset with the tax you add on for your sales. If you have the paperwork, you have the evidence. Second hand does cloud it a bit, but my purchases from any source get claimed if they have valid VAT added to them by the seller. If I buy on ebay and there is a VAT invoice available from the seller, in it goes!

 

[Shuggydiamonds]

Hi Paulears,

do people tend to go for large accountancy firms or local accountants? I won’t be generating huge income for a while yet.

thanks
Shug

 

[DontAsk]

I’m below 77k for vat but would like to register to benefit (hopefully) by paying circa 20% less for every purchase I make. Thousands of £ a year potentially.

It's £85k and you will still pay the VAT. You then offset what you pay against what you collect on your sales.

You will have to add 20% to your prices or take a hit on profit. That's going to happen anyway if you hit the threshold, so now might be the time to bite the bullet.

For worldwide customers the VAT inc. price may go up but you can then sell VAT free to them.

 

[Shuggydiamonds]

Auctioneers margin scheme I have looked into. I claim back the 20% vat on my purchases and then I pay vat on my profit margin per item.

apparently

this scenario (if true) means I am massively overpaying on vat at present

 

[paulears]

Local and small enough to care - being a modest customer of a small firm is much nicer than a minnow in a huge one. I called my old accountant and discovered my guy had retired and the new fella had no idea who I even was. A friend put me onto my current one - and if I go to the office or phone him up he makes me a coffee. He put me onto the software I currently use because he said it helped him do my quite simple accounts quicker - which would save me money, and while I now pay for software his bill has dropped. Works great for me - and best of all, they now keep an eye on what I'm doing and call me when I need to do things - or have messed up.

 

[DontAsk]

Auctioneers margin scheme I have looked into.

You are not an auctioneer.

 

[Shuggydiamonds]

You are not an auctioneer.

Well I read what’s available..and it’s clear as mud.

your short answer is perhaps wrong actually.

 

[Shuggydiamonds]

Local and small enough to care - being a modest customer of a small firm is much nicer than a minnow in a huge one. I called my old accountant and discovered my guy had retired and the new fella had no idea who I even was. A friend put me onto my current one - and if I go to the office or phone him up he makes me a coffee. He put me onto the software I currently use because he said it helped him do my quite simple accounts quicker - which would save me money, and while I now pay for software his bill has dropped. Works great for me - and best of all, they now keep an eye on what I'm doing and call me when I need to do things - or have messed up.

Thanks Paul,

I appreciate you taking the time to offer your advice.

It’s a hard bullet to swallow (accountancy fees) if ones income is irregular,
but clarification on vat at an early stage will benefit me going forwards for sure.

 

[Picture Bute]

If you are buying goods (and paying VAT on the purchase price) and selling them (and not charging VAT because you're not VAT registered), I'd be interested to know what advantage you think you're going to gain by registering.

 

[STDFR33]

You can’t use margin schemes when you are charged VAT. So it’s a non starter.

 

[Scalloway]

I claim back the 20% vat on my purchases and then I pay vat on my profit margin per item.

As far as I understand it you either claim 20% and charge 20% VAT or you pay VAT on the margin. You don't get the best of both worlds. More on VAT margin schemes here.

https://www.gov.uk/vat-margin-schemes

 

[DontAsk]

your short answer is perhaps wrong actually.

I'd be interested to know why you think you may be an auctioneer. Selling on eBay does not count

 

[WaveJumper]

Finding the right accountant for yourself is the key, you can ask around for recommendations, check out google and set aside time to go round and meet a few. Treat it as an interview can you work with them, do they offer what you want at the end of the day having a local accountant you trust and get on with will be the best outcome and save you not only money going forward but an awful lot of heartache too.

There is a lot of advice out there online and HMRC even run some free courses so check out their website

 

[lesvatadvice]

If the items you purchase are generally less than £500, then check the rules for Global Accounting, as that allows you to offset losses against profits.

 

[Paul Kelly ICHYB]

@Shuggydiamonds some great advice here, but, the best bits have been - speak to an accountant.

Get this wrong and it will end up costing you a lot more than what an accountant may charge you!