What VAT scheme to use when reselling clothes?

RSThePlug

Hello all, this is my first post so please be gentle

I have a business where I buy branded clothes and resell them for a profit, sometimes I buy from the manufacture direct so I could claim the VAT back on them, however sometimes I buy from other sellers who aren't a business, so for those purchases I will not be able to claim the VAT Back.

I am trying to work out what VAT scheme I need to use, as for example. If I buy some clothes from a regular person for £200, it would be impossible for me to charge £240 (20% VAT) before I even make any profit.

I have spoken to other people and they mentioned using something called the "Global margin scheme"? But my accountant has said that I cannot use this.

I'm just baffled on how these big reselling companies, such as Kickgame are able to operate and what would be the best VAT scheme for my business?

Sorry if this isn't straightforward, happy to answer any questions if you want to get a better unrderstanding.

Thakn you!

martindow

If your accountant has said you can't use the Global margin scheme, then that's that.

Generally speaking, if your sales are to individuals rather than VAT registered companies, you don't want to register for VAT if you don't have to and are under the threshold.  As you say, adding 20% to your selling price will make you uncompetitive.  It sounds as if you are making a profit without getting involved with VAT, so maybe you are better off carrying on as you are and keeping your turnover below £85k.

I imagine that the companies you mention are able to drive better discounts when buying in larger quantities.  Possibly as you approach the threshold you too will be able to get better prices that would allow you to turn a profit even with VAT.

Jeremy535897

Can you use a standard margin scheme? See:
https://goselfemployed.co/vat-margin-scheme-for-second-hand-goods-businesses/#:~:text=The VAT margin scheme for,they sell that item for.