Hi everyone, just hoping for some clarificiation on a couple of things that have been bugging me lately regarding the Second Hand Margin Scheme (vehicles, specifically)...
1) When it comes to the Margin Scheme and cash accounting, I've never really used it before as the few client's I have account for VAT on an invoice basis. I do, however, now have a client who is insisting on using cash accounting. How does this work with the margin scheme? For e.g. (assuming the quarter end is March) they sold a vehicle on 31/03 for £3000 and had VAT to pay on the profit of £200, but received the deposit of £500 on the 31/03 and the balance of £2500 on 01/04. How would you work out the VAT?
2) With regards to "extras" - should RFL be included within the selling price when working out the margin? What about things like DVLA fees (for reg plate tranfers etc)? Are they treated as a disbursement because the company is buying them on behalf of someone else and passing on the cost, and so outside the margin scheme?
Any help would be good... the more I try and read the guidance the more confused I get!!
Edit: I'm Faye by the way!!
-- Edited by fin6y on Thursday 31st of March 2016 08:05:50 PM
-- Edited by fin6y on Thursday 31st of March 2016 09:54:35 PM
Hi ?? (Sorry don't know your name as nothing in the signature bar or on your profile)
Can you run two different non standard VAT schemes at the same time? Other than global accounting with the margin scheme I mean. I've only ever seen the margin scheme with standard vat. Someone else on here might help answer that, but if not and you need to call the VAT bods can you let us know.
vat guide 718/1, section 10.3 will help with the licence question. Depends if it offered as part of the sale price.....if so then you need to add in the value of the licence to the sales price on your invoices and stockbook (then pay more Vat!!)
Dvla fees are outside the scheme as far as I'm aware. Not much is in the scheme generally. Care, lots of clients think the vat is calculated on the overall profit and want to include costs of internal services and mits and such, it's not....it's just on the actual margin between purchase and sale and only if it's eligible and strictly following the other rules, instead.
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Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
I was sure I'd seen somewhere that you can use the Margin Scheme with a Cash Accounting scheme, but now I've tried to search for it again all I can find is an old archived HMRC page that says "You may be able to use a margin scheme with the annual accounting or cash accounting schemes." so now I'm not sure! Can anyone clarify?
Isn't this a bit like retail and therefore cash accounting on sales by default, in as much as you aren't releasing the cars until payment is made. I would suggest the deposit does not constitute the sale just holds the car until payment is made, certainly in your example of £500 deposit then there is no profit at that point so no vat to pay over. So it works as standard accounting or cash accounting but if under standard accounting at least your client can claim the vat on purchases immediately. That's how I see it, not saying it is the definitive answer you are looking for.
Jo, not sure I agree (but could be wrong), I thought if the trader put an MOT on then the cost of the MOT was included in the sale and the total profit was taken into account?
Hi Rob
Lol - just seen Ive typed it as 'mits'. Mits are not allowable. I really MUST wear my glasses more! Sorry - MOT costs can be included if '' you have had to pay'' for them to make the vehicle saleable (section 3.1 I think). So my understanding from that is if you pay a third party for the mot you can include that cost. BUT if your own labour has been used to do the MOT internally then no you cant. There is an argument that you can include the £2 or £2.50 (whatever it is,cant recall) for to VOSA for the MOT. You certainly cant include the cost if you routinely include an MOT and service just before the car is sold if it wasnt actually required to sell the car.....there are lots of garages who put 12months MOT on, even when they car has say 6months already left to run. Thats just an internal profit issue rather than a VAT margin issue.
Hope that makes sense.
Hi Faye - I agree with Rob on the viewpoint of the schemes and also with regards to the deposits. Generally refundable and as you say no profit at that point.
What accounting software are you using and do they have a garage management system that links with the accounts package?
PS - To add your signature under the line, you can do it through edit your profile. But thanks for adding a name!
__________________
Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
I would not recommend using the margin scheme with cash accounting; part of the answer is explained above, in that you will not allow a car to be collected until payment is received.
On the purchases side, cash accounting actually defers the claiming of input tax. So, conventional invoice accounting will make claims quicker!
