VAT Questions

[spodokomodo]

Hello all, First time poster here!

I am a sole trader who mostly sells on eBay. This is only my second year registered as a sole trader. At the moment I am not VAt registered, but I am pretty sure I am going to hit the threshold some time this year, so I thought it would be best to get it sorted sooner rather than later. I have a few questions, and would greatly appreciated any advice and help you can give.

1) If the VAT threshold is £77,000, do I include ALL of my sales to see if I have met this, or just UK sales? I sell to UK, EU and non-EU, so which of these should I include in calculating my VATable turnover?

2) Should I get an accountant, or as a sole trader, is the paperwork easy enough for me to do by myself, once I understand the nuances of VAT?

3) I buy most of my stock from auction houses. On my invoices from the auction houses, there are usually 3 columns (Hammer Price, VAT, and Premium). The premium is a commission charge that the auction house takes for itself, and this is VATable, whereas there is no VAT on the hammer price. At the bottom of the invoice, it says "The Premium charge on margin items includes VAT which must not be shown separately or reclaimed as input tax. Input tax has not been and will not be claimed by me in respect of the margin goods sold on this invoice". So does this mean that I cannot claim back ANY VAT from my purchases from these auction houses?

4) If I buy something and the receipt has no VAT column (eg the price is VAT inclusive) does this mean I can't claim back the VAT, or can I just calculate the VAT myself?

Thank you!

 

[faradaykeynes]

include just UK sales for VAT threshold £77,000 and ignore non uk turnover for vat registration threshold.

Generally sale in UK are subject to VAT, any exports are generally non vatable but there are exception to this, better consult with your accountant or speak to HMRC

To reclaim VAT on your purchases you need to have VAT invoice from suppliers, showing vat number of them, if vat amount is shown thats fine if not then you can workout from gross value

 

[David Griffiths]

You seem to be buying second hand goods and then selling them on.

There is a special VAT treatment available for this known as a margin scheme. Where the goods qualify for this treatment you only account for VAT on the profit that you have made, not on the full selling price. This cannot be used where you have a VAT invoice for the purchase of the goods - in that case you recover the input VAT and account for output VAT on sales in the normal way.

There are specific record keeping requirements for using the margin scheme but it can save you a lot of money. Full details here.

 

[spodokomodo]

include just UK sales for VAT threshold £77,000 and ignore non uk turnover for vat registration threshold.

Generally sale in UK are subject to VAT, any exports are generally non vatable but there are exception to this, better consult with your accountant or speak to HMRC

To reclaim VAT on your purchases you need to have VAT invoice from suppliers, showing vat number of them, if vat amount is shown thats fine if not then you can workout from gross value

Thank you for your reply, but I just red this on the HMRC website: If you sell goods or services to someone who isn't VAT registered in another EU country, you must charge VAT in the normal way - just as you would for a UK customer. [/quote]Can someone else please corroborate?

You seem to be buying second hand goods and then selling them on.

There is a special VAT treatment available for this known as a margin scheme. Where the goods qualify for this treatment you only account for VAT on the profit that you have made, not on the full selling price. This cannot be used where you have a VAT invoice for the purchase of the goods - in that case you recover the input VAT and account for output VAT on sales in the normal way.

There are specific record keeping requirements for using the margin scheme but it can save you a lot of money. Full detailes here.

Thanks David - I just read your link and it was quite a lot to digest.

Some auctions use the margin scheme, but some others don't. So I would have to run two simulataneous books of accounts. Also, it says that you onhly pay VAT on the profit you make. That means I have to calculate the amount I spend on postage, packaging, petrol, etc, for every single sale. Surely that's going to add a huge amount of time to my record keeping?

 

[Figurate]

(HMRC don't normally give you tax advice, but they will point you to the VAT notice(s) to read, but David's already done that)

As you'll see from David's link, the VAT margin scheme has several variants and you will want to pick the one that's relevant to your business.

The VAT margin scheme is a bit more onerous than "standard" VAT.
An accountant will also help you to get the necessary paperwork/systems in place in a way that's best for your business with the minimum of fuss.
However, once in place, you can do all the bookkeeping yourself, if you wish.

Under a VAT margin scheme, you can still reclaim the VAT on normal purchases - just not on the actual cost of goods you purchase for resale (which, generally, by definition wouldn't have VAT on them anyway, as you've seen from your auction invoices - and that's the whole point of the margin scheme)

The VAT margin scheme also some additional requirements for your sales invoices (again, as you'll have seen from the auction invoices) you don't separately identify VAT.

Selling into the EU with the VAT margin scheme is another whole area to consider (again, as you'll see from the link) and is not quite like "normal" selling to the EU (so some of the usual rules about "reverse charges" might not apply, depending on your circumstances)

 

[David Griffiths]

. Also, it says that you onhly pay VAT on the profit you make. That means I have to calculate the amount I spend on postage, packaging, petrol, etc, for every single sale. Surely that's going to add a huge amount of time to my record keeping?

No - just the straight difference between cost and selling price of the item.

As I said there are record keeping requirements, but it can save you a lot of VAT