There is a huge market for dealing with second-hand goods, buying them, as well as selling them in the UK. However, you will have to be aware of the facts relevant to VAT on second-hand goods. This is because wherever comes the discussion of business profits after selling anything, here comes the role of tax implication as well. And no one is unaware of the tax matters and how strictly the rules are being followed in this regard in the UK. Sometimes the selling of second-hand goods takes place by an individual who is interested in selling some unwanted second-hand goods and then there are business models who are selling second-hand goods to earn profits.
Moreover, you might be an individual who is interested in selling any unwanted second-hand goods to free up space in your home and earn a few extra pounds or you are carrying out a business that has such a model of earning through selling second-hand goods. It is imperative to understand what you will have to pay in form of VAT. Let us kick off the discussion by gathering the relevant facts and information.
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Businesses Selling Second-Hand Goods – Is the VAT Threshold Applicable?
There can not be any escape from the implication of tax when you are associated with business activities and earning profit through it. In the same way, you will have to deal with the VAT threshold that is applicable for a business like selling second-hand goods.
In case the amount of your business taxable turnover is over the limit of the threshold, you will have to get your business registered for the VAT. This does not matter whether you are carrying out your business activities through a platform like eBay, e-commerce, or in stores. The implication is equally eligible to be applied if the earning is over the threshold limit.
What is the VAT Margin Scheme?
There is always a seek of alteration observed when it comes to saying the VAT, especially in the business models like selling second-hand goods. The VAT margin scheme just gets aligned according to this certain requirement. Under the VAT margin scheme, what you paid to purchase a second-hand item and how much profit you have earned will be calculated.
Then the VAT is paid with a certain ratio of the amount received after the difference between buying prices and reselling prices. Moreover, with the help of the VAT margin scheme, there will always be a possibility to reduce the amount of VAT and you will have to pay less in for of tax on your business activities.
What is the Eligibility Criteria for the VAT Margin Scheme?
There are certain products in the business of selling old items that can be used for the VAT margin scheme and then there are a few products that are not eligible to qualify for the criteria to use the VAT margin scheme. For example, items of collectors, antiques, works of art, and second-hand goods are all the rems that can be easily eligible to qualify the criteria of using the VAT margin scheme. On the other hand, precious stones, investment of gold, and precious metals, and buying of any items that include VAT are not eligible to get the benefits of the VAT margin scheme.
What Goods are Eligible for the VAT Margin Scheme?
As discussed earlier that the goods like collectors’ items and antiques are considered to be good for the point of contention in regard to the VAT margin scheme. The question that arises here is what refers to the collector’s items. Well, this is known to be the Government related items like the ices of archaeological interest, scientific pieces, currency, coins, and stamps.
What is the Way to Calculate your VAT Margin?
In order to calculate the VAT margin, the simple process is to find out the difference between the amount you paid to buy the product and the reselling price of the scale product. Extra expenses like the amount spent on the repairing of the second-hand goods must be included too.
What are Some Eligible Acquisitions of Second-Hand Goods?
There is a certain criterion to get the benefits of the VAT margin scheme. You will have to get in the circumstantial position where the goods are sold out and you are not in a position to get the claim of VAT. Some common practices are observed in different ways in this matter. These can be listed as given in the following:
- You are purchasing second-hand items from a business model that is selling the items using the VAT margin scheme.
- You are purchasing from casual sellers or trade-in customers that aren’t registered for VAT. This is because of the fact that they are exempt from the VAT.
VAT Margin Scheme – Do You Need to Register for it?
If you find your business in a better position to be eligible for the VAT margin scheme, you will have to get your business registered for VAT first. Then there will not be any requirement to get registered for the VAT margin scheme. The conditions that are discussed earlier in the guide can be used to see whether you meet the criteria. This can even be used in the VAT returns of your own business. So this explains that you will have to get registered for the VAT before you think of getting the benefits of the VAT margin scheme.
The Bottom Line
Now that you have gathered a fair amount of information about what is VAT on second-hand goods in the UK, we can bring the discussion towards wrapping up. There cannot be any escape from paying VAT on the selling of second-hand goods. However, with the help of the VAT margin scheme, this amount can be a little reduce and the benefits of the business model can be maximised. We hope these few minutes of reading will help you better understand the facts relevant to VAT on second-hand goods in the UK.
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Disclaimer: All the information provided in this article on VAT on second hands goods in the UK, including all the texts and graphics, is general in nature. It does not intend to disregard any of the professional advice.