My client buys salvage, non runners from Online Vehicle Auction - he uses the Marginal Rate scheme.
An example purchase invoice is...
vehicle price £3650
Buyers premium £330.50
VAT on charges £66.10
Net total £3980.50
VAT total £66.10
Invoice Total £4046.60
Client's Stock books shows purchase cost of £3980.50 (£3650 + £330.50) for the calculation of the VAT margin.
He then claims Net Cost ZERO, VAT £66.10... as an input VAT claim on his Profit & Loss Account
My question is... is that correct? I wondered if it should be £3650 as Stock Purchase price for the Margin Calculation.
Then Buyers premium £330.50 + VAT £66.10 as Other Direct Costs in the Profit & Loss Account.
Have read that if VAT is included you cannot use Margin. The VAT is purely on the Buyers Premium.. not on the car purchase.
Sorry hope you can follow... have googled HMRC website but struggling to confirm. Would like to get it as near as possible for MTD compliance in the future.
Yes client has used Margin Scheme for a number of years and says he had a previous VAT inspection which was accepted.
He repairs them and sells them on.
Some I think he keeps for parts.
My understanding is that auction houses will charge VAT on additional services (hammer price etc) when an item is inelligible for the margin scheme. So are these vehicles actually vans? Or purely cars?
I would suggest he contacts the auction house and advises them that he is running a VAT registered business so they can update their records with his VAT number (as that might be causing an issue).
Then I would ask for a separate invoice for the buyers premiums. That way he can then ensure he gets a separate and properly worded margin scheme invoice for the car itself and claim the VAT back on the buyers premium without restricting any onward claim on the sale of the vehicle.
But by doing what you have suggested he has done here, I would say he has double claimed the VAT back anyway.
See VAT guide 718/1 - section 8, paying note to 8.5.
HTH
__________________
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
