VAT on pre-owned / second hand goods Question?

[muckell]

Could anyone help me, i am trying to find out how a business would deal with VAT on goods purchased from the general public as second hand / pre-owned.

I know when the business sells the item on VAT will be charged, but can/how can VAT on the purchase cost be dealt with?

Any advice greatfully recieved

 

[Alpha]

It is unlikely that the members of the general public will be vat registered and therefore will not charge vat so there is no vat to recover.

 

[SuffolkDesigns]

It quite often works out better to buy new and claim back the VAT instead of buying 2nd hand with no VAT to claim back.

Example;Joe public buys laptop for £999 and 6 months later decides to sell it for £800

You could buy the same laptop new for $999 and claim back £149 VAT so the actual cost is only £850 + you have a proper receipt and full guarantee

 

[muckell]

The reason i ask is that we will be dealing in pre-owened dvds and computer games shortly and i'd not sure how to deal with the VAT issues.

If i buy a dvd pre-owned of joe public for £5, then put this on sale in store for £10, do i pay over VAT on the £10, as there is no input VAT that i can claim back.

 

[Alpha]

Yes

 

[winton50]

I'm not sure that VAT would be charged on second hand goods as such as they would then re-enter the VAT system.

If there is a liability it arises under the 'margin scheme'.

A technical point but one that the HMCE are keen to emphasise.

I would call your local vat office and get a clarification. Also make sure you make detailed notes and get their name!

of course one assumes that you would be over the VAT threshold - this is where there is a clear advantage to not being registered.

 

[Alpha]

Actually Stuart has a good point which I had not considered. The nore usual use of these schemes are in second hand cars, antiques and similar.

The margin scheme for second had goods scheme could be used by using the Global Accounting provisions but it would take several readings of the provisions to understand exactly how you would apply it in practice.

If you want to go ahead with this scheme it would be worth contacting HMRC and ask for someone to come out and go through the methodology with you.

If the volumes you are dealing with are reasonable then by all means go for this which means that you would be paying VAT on the profit rather than the sales value.

 

[winton50]

Alan - I think it's true to say that there is rarely a definitive answer from HMRC!

It seems to me that if you are doing anything its is best as you say above to contact your local office and get an answer from them.

The other possibility is the flat rate scheme which they seem to love at the moment. They spend a lot of time telling callers that it's to save businesses time but I suspect that it's to save inspectors time!

 

[Alpha]

Stuart (Sorry to have hijacked another thread)

The flat rate vat scheme is flavour of the month as it does give the inspectors an easier life however it does need careful consideration, in fact not a single one of my clients so far would be better off under the scheme (Particularly florists )

Some were slightly better off with the introductory 1% 'discount' but I could be cynical and draw a second conclusion. It of course also depends on what often very general, category the business is placed in.

 

[BMS]

Alan

The big issue is the level of input tax that the company has.

If this is low then the flat rate scheme may be beneficial to them.

......Just a thought but are there any copyright / ownership issues on second hand DVD's and games ?...............

 

[muckell]

Hi,

I just wanted to say a big thank you for all the advice above, i was'nt expecting so much help, which is great.

I will contact the HMRC and try and speak it through with them.

Thanks again for all the great advice..

 

[winton50]

Alpha,
Agreed we would be a lot worse off if we adopted the flat rate scheme.

However I am looking at starting an import company and it may be useful for us depending on various issues.

I think it was a genuine attempt to cut down on 'Red Tape' by the government but am not sure how many businesses it really would help. and anyway I don't belive we have as much red tape in this country as the daily mail would have us believe - but don't get me started!