.

TheBigDipper

It's starting to look to me like the VAT Margin Scheme is intended to make life simpler for VAT registered businesses who sell a lot of second hand stuff to collect a small amount of VAT for HMRC against the sale profit, not have to show that to their buyer (which makes commercial sense to protect the seller) and HMRC therefore doesn't require a VAT invoice to be issued, nor can any VAT-registered buyer offset what they paid against what they collect. It actually seems sensible. How on earth did that happen?

rlw

kt66 said:

This has bugged me for years, and maybe I get too worked up about it but I need to say this, I could be wrong, but don't think I am 

If you buy a guitar from a VAT registered shop for £1,200, then sell it at £600 it is not half the price.

The retail price would have been £1,000 plus VAT of £200, so the shop got £1,000, that's their price, regardless of what HMRC add on top.

Unless the second hand seller is VAT registered, £600 would be at 60% of the original price, not 50%
Hope this makes some sense.
Probably just me, VAT sucks 

Utter shite.

The retail price is £1200.00.  Half price would be £600.00.  As a non VAT registered end user - ie. a consumer - you can forget the concept of VAT as you have no choice but to pay it, as does every other member of the public.

Most dealers would be more than happy if VAT went away, never to return.  It is a pain in the arse to administer.

PS.  I'm an accountant.

rlw

guitars4you said:

dbphoto said:

I don’t think so, there is something that deals with that along the lines of SKU info?

I can't recall the last time in say 10/15 years that I've sold a used guitar to a customer that is vat registered so had to split the invoice as such - I can check it out though

do you assume then that at £600 cost and £700 sold - that the dealer then shows the sale as £683.34 + 16.66 vat - total £700

Guitar price - non VAT element     £600.00
                      VAT element            £ 83.34
                       VAT @ 20%            £ 16.66


And unless I was selling at least ten a week, I wouldn't be bothering if that's the profit.

guitars4you

dbphoto said:

I don’t think a seller has to use the ‘VAT margin scheme’ if they don’t want to, so I’m guessing if not then they would have to charge VAT on the total, and it would make sense that if they opted in or out it would be per year much like the flat rate scheme versus standard rate?

I'm not aware of that - but assuming you are a vat registered business then I don't know why you would not want to use it - as otherwise you'd have to charge vat on the full amount on used products - as such you'd be more expensive than your competitors - and why give Mrs May anymore

There are issues that can make it a bit messy - If you are a vat registered customer and sell me your used Tele (as part of a part exchange transaction) for say £1000 and charge me £1000 plus £200 vat  - I can't claim the £200 vat back and still use the second hand margin scheme - Technically in this instance we'd still have to use the regular vat tariff, as per a new guitar, then charge vat on the full price of the used sale as and when sold - but this is messy - You find this with certain private sellers selling you a used van and then have to charge you vat - ie many tradesman etc - many private buyers want to buy a used van with no vat on it

guitars4you

rlw said:

guitars4you said:

dbphoto said:

I don’t think so, there is something that deals with that along the lines of SKU info?

I can't recall the last time in say 10/15 years that I've sold a used guitar to a customer that is vat registered so had to split the invoice as such - I can check it out though

do you assume then that at £600 cost and £700 sold - that the dealer then shows the sale as £683.34 + 16.66 vat - total £700

Guitar price - non VAT element     £600.00
                      VAT element            £ 83.34
                       VAT @ 20%            £ 16.66


And unless I was selling at least ten a week, I wouldn't be bothering if that's the profit.

just an example I used for illustrative purpose

guitars4you

TheBigDipper said:

It's starting to look to me like the VAT Margin Scheme is intended to make life simpler for VAT registered businesses who sell a lot of second hand stuff to collect a small amount of VAT for HMRC against the sale profit, not have to show that to their buyer (which makes commercial sense to protect the seller) and HMRC therefore doesn't require a VAT invoice to be issued, nor can any VAT-registered buyer offset what they paid against what they collect. It actually seems sensible. How on earth did that happen?

it was initially introduced by Ted Heath's government on used yachts, cars and electronic organs back in the 70's - recognize why  ???????

Then rolled over at  a far later date to other sectors that buy/sell used - I don't think there is any vat in the antique trade when a product is over a certain age - I might need clarification on that

DefaultM

I find this interesting, but if I was selling a guitar for half what I paid and someone started talking about how its not half price because of VAT I'd just roll my eyes ignore their message. That transaction is never going to end well. 

Schnozz

THE MORAL OF THE STORY...

...Don't be a cheap skate sad act.

fretfinder

DefaultM said:

I find this interesting, but I was selling a guitar for half what I paid and someone started talking about how its not half price because of VAT I'd just roll my eyes ignore their message. That transaction is never going to end well. 

Agreed! 

guitars4you

just as well a vat registered business only pays vat on the profit and not charges it on the full price of the transaction as per a new item

Go back 10/20 years ago and the used market was pretty much handled via the high street with a few sales via your local paper, Exchange of Mart or Loot etc

Today with e-bay, gumtree etc etc and millions of transactions sold through such sites, via private buyers/sellers, with no vat at all - Dealers having to pay overheads, make a profit, offer a warranty etc are obviously already more expensive - So the 'second hand margin scheme' for vat is a small salvation for us - If we had to pay vat on top of the full used price, as per a new product, it would not make it worthwhile to handle used products and many stores would be out of business instantly - It would kill used products in the retail sector for vat registered businesses 

Hope that makes sense

rico

thegummy said:

BTW, if you don't like paying tax on things you buy, you'd hate this...

I ordered some nut files form StewMac in America. Presumably I already paid their own sales tax since the price I paid was the same as someone in America would have paid. Then there was the international shipping which is fair enough.

Then instead of getting it delivered here, I get a note that I have to drive to the sorting office and not only pay the customs tax (which I did expect but still a bit of a stinger if I already paid tax on the item in America) but the Royal Mail were charging me an additional 8 quid on top for no reason other than that I had to pay customs charge!

I bought an action gauge and six inch ruler from SM and I didn’t get stung?

dbphoto

Just to add, I’m certainly not an accountant, and have only gained little knowledge based on being self employed since I was 18, but I do find all of this stuff very interesting.

Maybe not quite as interesting as some of the other threads in here, but as a devout atheist who believes in the theory of evolution, that man landed on the moon and that the earth is round( ish) this thread at least won’t make me want to scream ;-)

guitars4you

Remember when we compare the prices of guitars now and in say 1978, we just look at the top price - Yet vat is now double what is was when first introduced at 10%

started at 10% - then a few might recall we had two vat levels for a while - 8% on many goods and 12.5% on luxury goods (can't recall the break down on what was classed as luxury goods) - Then did it go back to 10% for a while or jump to 15%  ?  - 15% was the next big move and stayed there for a while - then we had 17.5% - then 20% to bring us into line with much of Europe

The big plus for the government is vat is always collected on the full price of the transaction - so if we just add inflation every year, then allow for equal revenue/sales etc then the amount of vat collected would rise every year

ie - £100 + vat = £120 - £20  vat collected

now add 2% inflation - £102 + vat = £122.4 - £20.4 vat collected - that instantly makes inflation 2.4% not 2 %

just shows how much governments love controlled inflation - they could say inflation is 2% plus vat were applicable on many goods - yet their inflation stats are heavily distorted to suit their purpose

thegummy

Sporky said:

thegummy said:

 the Royal Mail were charging me an additional 8 quid on top for no reason other than that I had to pay customs charge!

They do the paperwork and they pay the clearance fees in advance so it goes through faster. That's what you're paying them for.

And you wouldn't have paid sales tax in the US. For online orders it's only applied if you're in the same US state as the seller.

That makes me feel slightly better that I wasn't paying sales tax twice at least.

8 quid for paperwork though, what a ripoff. If we had the option I'd do it myself.

thegummy

rico said:

thegummy said:

BTW, if you don't like paying tax on things you buy, you'd hate this...

I ordered some nut files form StewMac in America. Presumably I already paid their own sales tax since the price I paid was the same as someone in America would have paid. Then there was the international shipping which is fair enough.

Then instead of getting it delivered here, I get a note that I have to drive to the sorting office and not only pay the customs tax (which I did expect but still a bit of a stinger if I already paid tax on the item in America) but the Royal Mail were charging me an additional 8 quid on top for no reason other than that I had to pay customs charge!

I bought an action gauge and six inch ruler from SM and I didn’t get stung?

Glad to hear that.

I wonder if it's to do with being over a certain value or if parcels are randomly chosen to supply tax to?

Legionreturns

This argument comes up all the time. Used prices are "Whatever the seller can list at and still get a sale". If it's too much, they'll have to reduce until they find the sweet spot. If you don't want to pay it, don't. 

If you didn't want to pay the listed price on an item I was selling and wanted to negotiate I'd be happy to discuss it. If you messaged me telling me that vat was a factor and I should be charging x ... I'd quite happily tell you to jog on and wait for someone who's less of a knob to get in touch

TTony

rico said:

thegummy said:

BTW, if you don't like paying tax on things you buy, you'd hate this...

I ordered some nut files form StewMac in America. Presumably I already paid their own sales tax since the price I paid was the same as someone in America would have paid. Then there was the international shipping which is fair enough.

Then instead of getting it delivered here, I get a note that I have to drive to the sorting office and not only pay the customs tax (which I did expect but still a bit of a stinger if I already paid tax on the item in America) but the Royal Mail were charging me an additional 8 quid on top for no reason other than that I had to pay customs charge!

I bought an action gauge and six inch ruler from SM and I didn’t get stung?

That's because there's a lower limit @rico. ; If the value of your purchase is below £X (as declared by the seller), then no charges are applied.

I can't remember what £X is.

Whitecat

thegummy said:

BTW, if you don't like paying tax on things you buy, you'd hate this...

I ordered some nut files form StewMac in America. Presumably I already paid their own sales tax since the price I paid was the same as someone in America would have paid. Then there was the international shipping which is fair enough.

Then instead of getting it delivered here, I get a note that I have to drive to the sorting office and not only pay the customs tax (which I did expect but still a bit of a stinger if I already paid tax on the item in America) but the Royal Mail were charging me an additional 8 quid on top for no reason other than that I had to pay customs charge!

You didn’t pay any sales tax to StewMac. The only people who would have to would be customers who are in the same state as StewMac, and it would have been added on after the billing/shipping address were entered. Prices in North America are always listed “before tax” because of vagaries like this. 

JerkMoans

TTony said:

That's because there's a lower limit @rico. ; If the value of your purchase is below £X (as declared by the seller), then no charges are applied.

I can't remember what £X is.

It can't be very much - I got an attenuator thing from the States for £30 and didn't get stung; then I just had to pay the wretched fees for a hoodie I ordered from Canada for my son which was about £40...

JerkMoans

Well, well.  Gifts £39, retail goods £15

https://www.gov.uk/goods-sent-from-abroad/tax-and-duty