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I am looking to open an art gallery, the work I will sell

Resolved Question:

I am looking to open an art gallery, the work I will sell will be largely from non VAT registered artists, I understand that I will need to charge the buyer VAT at 16.67% on the difference between the purchase price from the artist and the selling price to the buyer.
However, I will not pay the artist until I have sold their work - is this still acceptable under the VAT margin scheme - or do I have to pay the artist first? What is the acceptable time difference between purchase and sale to be eligible for the VAT margin Scheme?
Submitted: 9 months ago.
Category: Tax
Expert:  bigduckontax replied 9 months ago.

Hello, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question.

The most important thing to remember when operating a VAT margin scheme is the maintenance of records. In particular the stockbook. Here is the advice from the relevant Gov UK web site:

'Stockbook

You must record certain information for each item you buy and sell that you want to use a margin scheme for.

PurchasesSales

Stock number in numerical sequence-

Date of purchase Date of sale

Purchase invoice number (unless you made out the purchase invoice yourself)Sales invoice number

Purchase price Selling price, or method of disposal

Name of seller Name of buyer

Description of the item-

-Margin on sale (sales price less purchase price)

-VAT due (16.67% or one-sixth)

You must keep VAT records for 6 years. You have to keep records until you sell the item for any stock you bought more than 6 years ago that you plan to sell under the margin scheme.'

You proposal not to pay the artist until you have received the sales income is perfectly proper. Thus the 'acceptable time' in your question is not relevant.

I do hope that you have found my reply of assistance.

Customer: replied 9 months ago.
Thanks for the reply - I was aware of the stockbook issues which led me to my main concern of "purchase after sale" question as proper accounts would probably show a sales date before a purchase date! I am assuming the margin scheme works for a 'sale or return' business as most art gallery's operate in this way?
Expert:  bigduckontax replied 9 months ago.

I should have said in my original reply that for VAT purposes one would not post a sale until the cash has been received. Then the purchase and the sale sale date would be the same as you would not 'purchase' until the 'sale' is made.

Please be so kind as to rate me before you leave the Just Answer site.

bigduckontax, Accountant
Category: Tax
Satisfied Customers: 3364
Experience: FCCA FCMA CGMA ACIS
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Customer: replied 9 months ago.
Understood - and thanks
Expert:  bigduckontax replied 9 months ago.

Delighted to have been of assistance.

Thank you for your support.

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