Gardiner and Hoolgate Auctions; VAT Q.

Gassage

G and H charge 20% VAT on sale price + 4% commission on auctioned items.

I thought, and I may be very wrong, that VAT on 2nd hand goods was paid only on the profit margain?

Can anyone like @guitars4you advise what's the correct practice?

Stuckfast

According to their website,

"11. The Premium

The Buyer shall pay to the Auctioneer a premium of 20% of the hammer price together with VAT on such premium."

... in other words you pay VAT on the premium, not on the lot itself, which is standard for auctions.

gavin_axecaster

Gassage said:

I thought, and I may be very wrong, that VAT on 2nd hand goods was paid only on the profit margain?

That has nothing to do with VAT charged on a sale - it's a VAT scheme (margin scheme) so a trader only pays VAT on the profit between purchase and sale prices. I believe the VAT rate charged to buyers is still 20% or whatever standard rate applies to the goods.
EDIT: actually it appears that you must not specify a VAT % on a sale when using the margin scheme.
https://www.gov.uk/vat-margin-schemes/keeping-records

guitars4you

The vat is charged on the 20% handling fee that G&H charge at the point of sale - So £1000 hammer price, £200 commission therefore vat on £200 is £40 - Total payable is £1240 - I've never sold a guitar via G&H but I know they charge a handling fee to the owner/seller of the guitar, which I believe is 20% again - As such the buyer pays 20% + vat and the seller is also charged 20% plus vat - But the vat is only charged on G&H's commission - Yet as it is part of the margin scheme a vat business can not claim it back

Slightly different in a shop as @gavin_axecaster ; comments above - if I trade a used guitar in at £1000, sell it for £1500  Hence £500 profit - Then the vat office require a cut on the £500 -  in this case £83.34 is the vat that the dealer pays, so my margin is reduced to £416.66 - This vat is not reclaimable to even a vat registered business as it is part of what is called 'the margin scheme' - On the margin scheme it is the dealer that pays the vat

Hope that makes sense

blobb

Stuckfast said:

According to their website,

"11. The Premium

The Buyer shall pay to the Auctioneer a premium of 20% of the hammer price together with VAT on such premium."

... in other words you pay VAT on the premium, not on the lot itself, which is standard for auctions.

They also say:

All hammer prices subject to buyers premium of 20% + VAT (24% total)

... which kind of sets out a standard measure for all sales of 24%. Based on the £1000 example this works out, less cost they win, higher cost they lose out. This is not in their terms and conditions, so not binding, but I could see why they might want to make it a straight 24% total. Makes things easier for potential bidders to see the total outlay.

Strat_a_tat_tat

blobb said:

They also say:

All hammer prices subject to buyers premium of 20% + VAT (24% total)

... which kind of sets out a standard measure for all sales of 24%. Based on the £1000 example this works out, less cost they win, higher cost they lose out. This is not in their terms and conditions, so not binding, but I could see why they might want to make it a straight 24% total. Makes things easier for potential bidders to see the total outlay.

Don't understand the bit I've put in bold and underlined.  Surely they are taking 20% of whatever the items sells for (plus another 20% from the seller). If it's a high or low cost item, don't they still take 20% buyer's premium... so high cost items result in more £s for the auctioneer (but same percentage).
Similarly, the total is always 24%.

guitars4you

Strat_a_tat_tat said:

blobb said:

They also say:

All hammer prices subject to buyers premium of 20% + VAT (24% total)

... which kind of sets out a standard measure for all sales of 24%. Based on the £1000 example this works out, less cost they win, higher cost they lose out. This is not in their terms and conditions, so not binding, but I could see why they might want to make it a straight 24% total. Makes things easier for potential bidders to see the total outlay.

Don't understand the bit I've put in bold and underlined.  Surely they are taking 20% of whatever the items sells for (plus another 20% from the seller). If it's a high or low cost item, don't they still take 20% buyer's premium... so high cost items result in more £s for the auctioneer (but same percentage).
Similarly, the total is always 24%.

correct - they add 20% to the hammer price regardless of that coming down at £100 or a £1000 - so £20 + vat (£24 total) or £200 + vat (240 total)

In simple terms just add a 1/4 to the bidding price - do that in your head as you go along and you know what you are bidding at in 'true terms' - So if bidding is approaching £1600, expect to pay an additional £400 - simple rule with out nailing down to the nth degree

blobb

er yes sorry my dodgy maths at work there. It's 20% of 20% every time = 24%

Snags

Coo, is that normal for auctions, that the house takes a fee from both buyer and seller?

An ignoramus writes.

guitars4you

Snags said:

Coo, is that normal for auctions, that the house takes a fee from both buyer and seller?

An ignoramus writes.

yes - the % might vary but the principle is the same