VAT at 7% for sellers of second hand goods

thriftybeatnik

Hi there:

A friend of mine sells secondhand fireplaces. As I am slowly heading towards being charged VAT he told me that there is a scheme for sellers of secondhand goods, like myself, charged at roughly 7%. The only drawback per se is that you can't claim back VAT but this is totally fine for me. Has anyone any help or advise on this?

Please note. I am utterly illiterate when it comes to tax matters so I need to be able to be spoon fed information to take to my accountant / tax advisor.

Thank you kindly

Thrifty

chrismac1

I suspect he means the Second Hand Margin scheme whereby you account for VAT on the Gross Profit and not the Sales Value. Your friend has got things a bit mixed up. There are various rules which need to be closely followed. If you PM me I can send you something I did for a couple of second hand car dealers on my books, which summarise the rules into 2 pages.

thriftybeatnik

Smashing. Thank you kindly

ben.bayliss

I can't help in this case but I love how quickly "a friend of mine" became "I". Genius

I don't think it's the second hand scheme though. I think it's a fairly common scheme where HMRC determine what % a typical business in each industry might normally be expected to pay over, and then simply charging that instead of making you account for it properly which might be more hassle.

chrismac1

That would be the flat rate scheme - "retailing not listed elsewhere" - current rate 7.5%. Warning - the flat rate scheme rates are pretty stingy, most clients are better off doing "normal" VAT.

http://www.hmrc.gov.uk/vat/start/schemes/flat-rate.htm#5a

And there are pitfalls, especially where a business is spending on capital items.

JasonLVC

Yep, the OP appears to be describing the Flat Rate Scheme, not the second hand margin scheme (two totally different things).

You need to do the maths to see if the Flat Rate is good for you or not, it usually is if you have very low overheads (ie work from home), have very few purchases which are subject to VAT.

You cannot operate the second hand margin scheme and the flat rate scheme together/in unison, it is one or the other.

If the OP is off to see their accountant, then the accountant should be explaining this to the OP in simple language. That the OP is having to gen up to inform his accountant suggests they need a new accountant.