Second hand & VAT

jyonda

If I buy second hand goods to sell on for a profit and am required to charge VAT then is it possible to reclaim any VAT back from money spent on stock? It seems odd that if I bought new stock with a VAT receipt then I'd be able to claim VAT back which could even make new stock cheaper than second hand. Obviously I wouldn't get a VAT receipt from someone at a car boot sale for example but someone at some point paid VAT for it.
Is there a mechanism for this? What do car traders do who buy stock from the public?

Treading_Water

Unfortunately you can't reclaim VAT unless you are buying goods from a Vatable supplier. This should be reflected in the price -if what you buy is more expensive 2nd hand than the net price of a new item, then you are obviously overpaying for it.
I think you will find that this is the same with 2nd hand car dealers and the price they offer will be a net price ith VAT as extra if its from a Vatable trader.

Pennywise

There is a special VAT scheme for second-hand traders to take account of your valid point. Go to https://www.hmrc.gov.uk and search for second hand VAT scheme and it should give you the relevant pages to look at.

Re cars, there is a similar scheme. There is no VAT on used cars, but the garage has to pay VAT on the profit it makes, so it calculates the profit on a car-by-car basis and then pays over vat on the profit of each.

Treading_Water

Sorry Pennywise. I'd forgotten the VAT margin scheme.

jyonda

From what I've read the VAT Margin scheme means that VAT is only liable on the profit between purchase and sale price. Other business costs to repair and prepare the item for sale are accounted for under normal VAT rules. Goods which are sold under this scheme must state it on the invoice so that full VAT cannot be reclaimed by the purchaser.
I got exactly the answer I was looking for. Cheers!

jyonda

Just one thing though... My understanding is that you have to write your own invoices (to yourself) for the stuff you buy which presumably is wide open to abuse? Or does the supplier have to verify the sale in some way? This would be a bit dfficult when buying off of the general public.