VAT Advice (Margin Scheme)

[anthonytaylor]

Hello

I am looking for a bit of advice regarding VAT, which we recently registered for.

We mainly purchase second hand items from private sellers for most of our stock - last month we spent almost £10,000 in cash.

At the same time as our business and contact list grows we are also purchasing from VAT registered sellers.

Now, I am obviously unable to claim any VAT back (over £1,600 worth last month) when purchasing second hand goods from private sellers which is unfortunate.

I just trying to work out the most effective way of handling the sides of the business.

My instincts tell me that a combination of the Standard Tariff (which will allow me to claim back other VAT inc purchases) and the Margin Scheme would be most effective.

Does anyone else use a combination of Standard / Margin Scheme tariffs and if so how do you find it? Advantages / Drawbacks?

My only concern with the Margin is the additional paperwork and hassle involved accounting for all of the second hand goods we purchase.

Regards,
Anthony

 

[RAL]

In simple term, and meeting other conditions for the margin scheme,

You apply the margin scheme where you purchased second hand goods on which no VAT was chargeable i.e. purchased from private individual.

If you buy from vat registered business and vat is chargeable then you need to apply normal / standard vat scheme.

Have read on vat notice 718.

 

[David Richards]

Now, I am obviously unable to claim any VAT back (over £1,600 worth last month) when purchasing second hand goods from private sellers which is unfortunate.

You've lost me here. A private seller wouldn't have charged you VAT... therefore there's no VAT to reclaim. So where does the figure of £1,600 come from..?

 

[Figurate]

You do both...
If you purchase an item from a private non-VAt registered person, then when you sell that item on, you apply the VAT margin scheme to those sales.
That is - there wouldn't be any VAT to claim back on these purchases - and you would have to charge VAT on the margin.
(as David Taylor said - not sure where the £1600 of lost VAT would arise - as unregistered sellers wouldn't have charged you VAT. And you cannot claim the VAT back that they would have paid on their original purchase of the item)

If you purchase from a VAT registered seller, then you claim the VAT back as normal/standard. Then when you sell that item, you would have to charge VAT on the full amount of the sale.

As Ral says, VAT notice 718 covers VAT margin schemes (and also includes information about the stock book you'll need to keep in order to operate the VAT margin scheme, as well as simplified alternatives, such as global accounting -which may or may not be of benefit to your circumstances)

Here is a link to an overview of the VAT margin scheme: http://www.hmrc.gov.uk/vat/start/schemes/margin.htm
and VAT notice 718 can be found here:
http://customs.hmrc.gov.uk/channels...ertyType=document&columns=1&id=HMCE_CL_000145

 

[deborahc]

I agree with all other answers, and you're right there is some additional admin involved in the margin scheme.

You'd need to keep detailed and accurate stock records of every item of stock bought for resale, sold, scrapped or otherwise disposed of. You need to be aware of what is, and is not included in the margin calculation. When you buy goods from a private seller you need to issue an invoice for the purchase, as well as for the sale of the same item.

Also, if you use accountancy software, bear in mind that it may not handle the margin scheme and stock recording, so you may need to look for an appropriate alternative.