28th June 2017
There are thousands of businesses across the country that are based on the trade of second hand goods – from high-end art and antiques dealers to highly successful auction site traders.
If you run a business like this, you may know that HMRC operates a margin scheme in relation to your VAT payments. The scheme is designed to save you VAT on the trade in second-hand goods.
Many traders fall foul of this scheme, however, because they don’t follow the straightforward rule that drives the calculations involved. For these purposes, the sum is a straight forward one: the proceeds from selling the item, minus the cost of purchase. You can’t make any other deductions, as you might in other businesses. So any work you do on the item, or any money you spent making it fit for re-sale cannot be taken into account.
In order to use this scheme successfully, traders must keep accurate stock records, showing the purchase and selling price of each item, and you must also meet strict requirements on invoicing. Failure to do so means you won’t be able to take advantage of the scheme, and your tax liabilities may increase.
There is some respite, however, if you’re involved in selling high volumes of low-value goods, such as online auction site purchases, or other second-hand goods with a value of less than £500. It may be that the ‘global accounting scheme’ could be applied to your goods, which means that VAT is payable at the end of each period and is calculated on your total sales minus your total purchase price.
Talk to us to see if this applies to you, and to find out how we can help apply either type of scheme to your business.
Whilst most second-hand traders buy and sell within the UK, there are businesses which sell goods to other countries. This is becoming increasingly common for online sellers, and so those who are earning over the VAT threshold and are required to complete VAT returns may need to seek advice, as calculations and record keeping can be complex.
Call Wise & Co today to see how we can help.