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taxadvisor.uk
taxadvisor.uk, Chartered Certified Accountant
Category: Tax
Satisfied Customers: 4984
Experience:  FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
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I am buying phones on the reverse charge scheme, as invoices

Customer Question

I am buying phones on the reverse charge scheme, as invoices are more than £5,000. These are second hand phones and would like to know if I can sell these on the second hand margins scheme?
Submitted: 2 years ago.
Category: Tax
Expert:  taxadvisor.uk replied 2 years ago.
and welcome to the site. Thank you question.

Although you can use a margin scheme phones because they would fall under the band of second-hand goods, you should be aware of the fact that there are certain contstaints in using the second hand scheme ..more information on this can be found under Margin schemes and standard VAT here

https://www.gov.uk/vat-margin-schemes/eligibility


I hope this is helpful and answers your question.

If you have any other questions, please ask me before you rate my service – I’ll be happy to respond.

Customer: replied 2 years ago.

Under the reverse charge scheme there is no VAT charged on the phones when I buy them from my supplier, does this means it is eligible to sell these under the margin scheme as it is required that I must purchase items that have no VAT on them and that are second hand?

Expert:  taxadvisor.uk replied 2 years ago.
Thank you reply.

You would pay charge VAT on the difference between your buying and selling price and pass that to HMRC. margin scheme does not preclude you from buying items that have no VAT charged on them.. The criteria is that the goods are second-hand.

I hope this is helpful.
Customer: replied 2 years ago.

Thanks I have one final question.

If this is the case, please advise what amount of VAT I would pay if I purchase a second hand phone for £115.00 and sell it for £149.90.

I also have to pay £6.00+ VAT postage (which is included in the selling price)

As well as £6.50 + VAT fees.

Please advise.

Thanks

Expert:  taxadvisor.uk replied 2 years ago.
Thank you reply.

Under the margin scheme, you pay VAT on the margin i.e (149.99-115.00) = £34.99 and your VAT becomes £6.99

You can not include business overheads in your calculations when using the margin scheme .. you can't claim VAT on the postage and ebay fees.

More information onwhat is filled on your VAT return is covered herehttps://www.gov.uk/vat-margin-schemes/keeping-records

I hope this is helpful.
Customer: replied 2 years ago.

Thanks .

I have read through the HMRC links provided, I am still unclear as to weather or not second hand goods sold to me under a reverse charge scheme (my suppliers invoices says Reverse Charge Scheme) can be sold under the margin scheme by me?

Are you able to shed some light on this...effectively can I use margin scheme in conjunction with the reverse charge scheme hand phones.

Expert:  taxadvisor.uk replied 2 years ago.
Thank you reply.

Reverse charge scheme was introduced to counter missing trader situations.
To the best of my knowledge, it is not precluded.

If you need another opinion I suggest ring the VAT helpline.. If they are unable to answer you, they would suggest you write to them definitive ruling.

I hope this is helpful.
Expert:  taxadvisor.uk replied 2 years ago.
A slight correction to the calculation - my apologies

Under the margin scheme, you pay VAT on the margin i.e (149.99-115.00) = £34.99 and your VAT becomes (£6.99) see below

34.99 x 20/120 = £5.83

Ex VAT value = £29.16
VAT at 20% = £5.83
Margin on sale = (29.16+5.83) = £34.99

many thanks