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bigduckontax
bigduckontax, Accountant
Category: Tax
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Experience:  FCCA FCMA CGMA ACIS
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I am a retailer selling used mobile phones online and want

Customer Question

I am a retailer selling used mobile phones online and want to buy from a new wholesaler. They however are stipulating that we have to use the VAT reverse scheme opposed to the VAT margin scheme we usually use.
Can both be used the same time? Or if I use the reversal scheme will I then have to charge VAT on the full selling price as opposed to the profit margin as I did before?
Submitted: 2 years ago.
Category: Tax
Expert:  bigduckontax replied 2 years ago.
Hello, I'm Keith and happy to help you with your question.
The VAT reverse scheme is used when trading with organisations or individuals in other EU countries who are registered for VAT or its equivalent. Its effect is to make goods or services effectively zero rated.
Here is the Gov UK web site proviso on the margin scheme:
'You can’t use a margin scheme for:
any item you bought for which you were charged VAT'
So if you continue to operate in an environment where you are not being charged VAT on purchases then, in my opinion, you can continue to use the scheme.
I do hope I have helped shed some light on your query.
Customer: replied 2 years ago.
Hi, thanks for your anewer. From other things that I've read however it would seem that it doesn't actually zero-rate it the VAT. It just means I wouldn't have to physically pay them the money for the VAT, but I'd still have to put it in my VAT return. That says to me that I theoretically have been charged VAT and so can't use the margin scheme?
Expert:  bigduckontax replied 2 years ago.
My wording was that the reverse scheme effectively makes the transaction zero rated. It effectively eliminates the tax. The vendor most certainly has VAT entries as identical input and output taxes, but the buyer has none. The only entry you would have in your VAT return would be an item in box 9 of the VAT 100, the quarterly return.
Customer: replied 2 years ago.
Ah right, I see.
So effectively, if I buy a phone for £100, I put £20 in both input/output tax, meaning it still only costs me £100. If I then sell it for £150 to a consumer, I will still only have to pass 20% of the £50 difference to HMRC using the VAT margin scheme?
Expert:  bigduckontax replied 2 years ago.
Correct, you have it to a T, but it's the vendor who has the double sided VAT entries not you..
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 3361
Experience: FCCA FCMA CGMA ACIS
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Expert:  bigduckontax replied 2 years ago.
Thank you for your support.
Expert:  bigduckontax replied 2 years ago.
Thank you for your support.
Sent again, otherwise it would keep recurring on your PC as an info request not acknowledged. I hit the wrong key, sorry!

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