VAT question on used items.

homi

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Can anyone answer a question on VAT on used items , 


If for example a VAT registered company bought an item from a private non vat registered individual for £1000 and sold it for  £1350 ..  would this be £1000 + 20% vat = £1200 so the  profit would be £150 ( not taking into account other charges/ costs  ) .

Are they still able to claim back the VAT if the person is not registered ?

I ask as a family member recently sold a few items to VAT registered company and they were really  lowballed and out of desperation took the money  . The buyer really pushed that they were VAT registered  and any sales would have to include the 20%... They paid them £300 and sold for £900 .

Thanks 

BoGoF

I'm confused with the 'listing' - in your example who is listing at £1350? 

Basically if no VAT was charged by the individual (as they are not registered) then there is no input VAT fot the buying (VAT registered) to claim. They (the VAT registered company) would however need to charge VAT on any sale of that item and I suspect is what they mean. They still need to add VAT on and a profit margin.

molerat

They sell for £1350 then that is £1125 + £225 VAT so making them £1350 - £1000 - £225 = £125 profit.   If they bought from a VAT registered trader they could have paid £1200,  £1000 + £200 VAT.  Their profit on the sale would be £1350 - £1200 - (£225 output VAT - £200 input VAT) = £125.  They have still paid the same £1000 for the item and paid the same VAT but split across the trader they bought it from and HMRC.  They can only "claim back" VAT they have actually paid out.  So they will pay less up front to a non VAT registered individual than to a VAT registered business but the base price they pay is the same.

noitsnotme

homi said:

.
Can anyone answer a question on VAT on used items , 


If for example a VAT registered company bought an item from a private non vat registered individual for £1000 and sold it for  £1350 ..  would this be £1000 + 20% vat = £1200 so the  profit would be £150 ( not taking into account other charges/ costs  ) .

Are they still able to claim back the VAT if the person is not registered ?

I ask as a family member recently sold a few items to VAT registered company and they were really  lowballed and out of desperation took the money  . The buyer really pushed that they were VAT registered  and any sales would have to include the 20%... They paid them £300 and sold for £900 .

Thanks 

With the actual figures you state at the end, the VAT registered company bought it for £300 (no VAT involved as your family member is not VAT registered) and sold it for £750 +VAT (which is £900 inc VAT).  So they made a pre-tax profit of £450.

There are some second hand items that would be eligible for the VAT margin scheme which could see less VAT paid - https://www.brchamber.co.uk/paying-vat-on-second-hand-goods.

That doesn't really have anything to do with your family member though.  I assume they were not forced to sell it at such a low price and could have have said no to the £300.

DullGreyGuy

homi said:

.
Can anyone answer a question on VAT on used items , 


If for example a VAT registered company bought an item from a private non vat registered individual for £1000 and sold it for  £1350 ..  would this be £1000 + 20% vat = £1200 so the  profit would be £150 ( not taking into account other charges/ costs  ) .

Are they still able to claim back the VAT if the person is not registered ?

I ask as a family member recently sold a few items to VAT registered company and they were really  lowballed and out of desperation took the money  . The buyer really pushed that they were VAT registered  and any sales would have to include the 20%... They paid them £300 and sold for £900 .

Thanks 

You can only reclaim VAT you've paid on business expenses... a non-VAT registered seller shouldn't be charging VAT and so no VAT to recover. You'd be paying VAT on the £1350 sales price so your profit excluding sales costs is £125 not £150. 

Grumpy_chap

Your family member sold the item for £300.   They did not have to agree that price.

The purchaser sold the items for £900.  
To make the change from £300 to £900 in value, did the purchaser need to refurbish / clean / prepare the items in any way?
The purchaser also knew who to sell the items to that would generate the £900 return.  Did your family member know where to sell the items to receive the £900?  If so, why didn't they sell direct to that purchaser?

homi

Grumpy_chap said:

Your family member sold the item for £300.   They did not have to agree that price.

The purchaser sold the items for £900.  
To make the change from £300 to £900 in value, did the purchaser need to refurbish / clean / prepare the items in any way?
The purchaser also knew who to sell the items to that would generate the £900 return.  Did your family member know where to sell the items to receive the £900?  If so, why didn't they sell direct to that purchaser?

fully agree , they were not forced to sell but I think they issue was / is that they were told that the item would be sold  for 600 so could they could only offer 300 as they were VAT registered and had to factor this into to the offer price.  

InMyDreams

homi said:

as they were VAT registered and had to factor this into to the offer price.  

This is correct. You have to take VAT out of the equation.

Effectively they have bought (from your relative) for £300 and sold for £750 (as any VAT they had to charge on top goes to HMRC before any other expenses or tax are even taken into account).

Had your relative managed to sell the item for £900, they would have been able to keep the full £900, but a VAT registered business can’t.

Had the VAT registered business paid another VAT registered business £300 for the item, they would have been able to reclaim £50 of VAT from the £300 paid (£250+£50 VAT) but as the payment to your relative didn’t include VAT, they couldn’t.

homi

InMyDreams said:

homi said:

as they were VAT registered and had to factor this into to the offer price.  

This is correct. You have to take VAT out of the equation.

Effectively they have bought (from your relative) for £300 and sold for £750 (as any VAT they had to charge on top goes to HMRC before any other expenses or tax are even taken into account).

Had your relative managed to sell the item for £900, they would have been able to keep the full £900, but a VAT registered business can’t.

Had the VAT registered business paid another VAT registered business £300 for the item, they would have been able to reclaim £50 of VAT from the £300 paid (£250+£50 VAT) but as the payment to your relative didn’t include VAT, they couldn’t.

Thanks , not too sure but as it is a used item would the not just  pay the VAT on the " profit" if they use the VAT margin scheme ?

noitsnotme

Does it matter now?  The deal is done.  What do you hope to achieve after the fact?