VAT Margin Scheme Confusion....

[oldskoolbm]

Hi all, this is my first post so please be gentle with me.
I will soon be turning a hobby into a business and I have stumbled across the VAT margin scheme which I may be able to apply.
My business is a specialist BMW used parts supplier.
I acquire vehicles from private individuals so there is no VAT to pay, then dismantle them and book the whole car, albeit in 300 different components, onto a computerised stock system. Parts are then sold via forums/ebay/website again mainly to private individuals.
I understand the need to run a stock book and have read the hmrc info available.
The only problem i foresee is how to determine a purchase price for each individual item when it sells.
If I were to purchase a complete car for say £2000 and strip it to 300 pieces which over a two year period may sell for £6000, how would I determine the purchase price for a headlamp which sells for £60.
Can I use this scheme in this way?
Your help is very much appreciated.
Steve:|

 

[Robert Pearce]

If a car that you buy for parts would be eligible under the normal margin scheme, then you can operate the Global Accounting scheme instead. This is a simplified version of the margin scheme which, rather than looking at the margin on each individual part, looks at the overall margin achieved during the period. There is, however, a rule that says that any individual components that are worth more than £500 each can't be put through the scheme.

See section 7.3 of VAT Notice 718/1 and section 14 of VAT Notice 718 for more details.

 

[oldskoolbm]

Thanks Robert,
That is extremely helpful, and it looks like it would work very well indeed.
Its time to get in touch with my old accountant and get up to speed with it.
Thanks again for taking the time to reply.