Hi could anyone advise me on the correct treatment for VAT on the following transaction.
My client is VAT registered and runs a taxi company.
On 11/1/11 client sold at auction a car as follows Sale price - £1625 Sale VAT - £0 Commission - £120 VAT on Commission - £24 Net money received - £1481
Would client declare output tax on £1481 or would they declare output tax on £1625 or would they not claim output tax as invoice states NIL
Client has calculated VAT on the £1481, but at 17.5% because that is the rate of VAT that they paid when it was bought.
Any help much appreciated as head is boggled tonight.
Thanks Bill, Much appreciated. I will have to go searching, as unfortunately the car was originally bought before I did the books!
If the sale in January should have had VAT added, what would that mean for the client? Would you assume the £1625 is gross and declare the VAT on that?
I have looked a bit of a closer look into this, and it may be that the VAT was charged by the auction house, if it was applicable, so there will be no VAT on the sale by you client. Might be worth checking though, as the liability could come back to your client, although I would expect an auction house to ask the necessary questions at the beginning.
A look at the original auction invoice might give you more detail but the £1625 will be the hammer price to the new buyer, so it will be before any VAT is added. As it is at the moment, there is no VAT involved in the sale of the car except for the input tax on the commission.
Did the taxi company claim VAT on the purchase of the car? The answer to that question will affect whether output tax is due on its sale.
If, as it looks, VAT was claimed on the purchase, then the gross proceeds are deemed to be VAT-inclusive. (The seller should, of course, have indicated to the Auction that the car is a qualifying car!)
Output tax is £1,625 x 1/6 = £270.83 (assuming VAT rate at 20% at date of sale)
That was what I was trying to say but not very clearly
It will depend on whether VAT was claimed back on the original purchase of the vehicle (being a taxi is one of the few trades that can claim back VAT on a car)
To complicate things even further, if the car was originally purchased second hand, with VAT added on the margin scheme (and subsequently claimed back by the taxi co) then any Vat due on disposal would depend if it sold for more than originally paid for.
Bill if VAT was claimed on the car, albeit second hand (ie: qualifying car), then the taxi company will be liable to pay VAT on its full selling price. Hopefully the member who made the original post will clarify this point, Les
