VAT deregistration. Second hand goods.
Discussion
We are in the process of looking to deregister from VAT.
We understand that we need to pay VAT on goods and equipment that we currently own that we have paid VAT on - that is not a problem per se, but we have quite a few bits of equipment that we bought second hand (from a variety of sources, ebay, gumtree etc) from non-business vendors.
Do we consider the market value and thus the VAT on these pieces of kit when we work out how much to pay / we owe HMRC to deregister or not?
My current thinking is No, we don't, as no VAT was paid/reclaimed in the transaction which gained us the equipment in the first place.
There are no "big ticket" items (50 to 100 quid typically), but they are fairly numerous (30 odd) and we would like to do it right (as we assume that deregistering will set off an alarm somewhere and attract an audit.
We would ask our accountant but we've asked so many questions already this morning he's gone golfing on the proceeds
We understand that we need to pay VAT on goods and equipment that we currently own that we have paid VAT on - that is not a problem per se, but we have quite a few bits of equipment that we bought second hand (from a variety of sources, ebay, gumtree etc) from non-business vendors.
Do we consider the market value and thus the VAT on these pieces of kit when we work out how much to pay / we owe HMRC to deregister or not?
My current thinking is No, we don't, as no VAT was paid/reclaimed in the transaction which gained us the equipment in the first place.
There are no "big ticket" items (50 to 100 quid typically), but they are fairly numerous (30 odd) and we would like to do it right (as we assume that deregistering will set off an alarm somewhere and attract an audit.
We would ask our accountant but we've asked so many questions already this morning he's gone golfing on the proceeds
What is the market value of these goods?
The normal procedure when de-registering for VAT is to account for Output VAT on the Market Value (MV) of unsold stock at the date of de-registration.
I would imagine that, if the MV of the goods is higher than the purchase [price, then you would still declare Output VAT on the difference as you would have declared VAT on the margin if you had sold it.
The normal procedure when de-registering for VAT is to account for Output VAT on the Market Value (MV) of unsold stock at the date of de-registration.
I would imagine that, if the MV of the goods is higher than the purchase [price, then you would still declare Output VAT on the difference as you would have declared VAT on the margin if you had sold it.
That's the badger.
It's not the stock, it's the assets. We make and sell ice cream. The ice cream side of it is easy, most of the machinary is easy (bought from normal big suppliers, vat reclaimed, value today and work out vat owed on that).
But, for example, we have a lot of domestic upright freezers (for storing stock) that have been bought, second hand, from here, there and everywhere. They are not stock to sell (we'd not sell them, as we run them until they break and then bin them) and are relatively worthless (no shelves or baskets as we strip them out and throw them away), are tatty and scratched etc.
We never reclaimed any vat on purchase as they were invariably from private individuals - all receipts are kept and in the filing - and are not intended ever for sale. Do we have to assess their current market value and pay vat on that even though none was ever paid/reclaimed to begin with?
There is enough of these things knocking about to make a difference to the size of payment we have to make. It seems counter-intuitive to me to have to pay vat on items it was never reclaimed on and were never intended for sale.
We are continuing to trade and see no reason (touch wood) why that will change, so these items will not be disposed of.
It's not the stock, it's the assets. We make and sell ice cream. The ice cream side of it is easy, most of the machinary is easy (bought from normal big suppliers, vat reclaimed, value today and work out vat owed on that).
But, for example, we have a lot of domestic upright freezers (for storing stock) that have been bought, second hand, from here, there and everywhere. They are not stock to sell (we'd not sell them, as we run them until they break and then bin them) and are relatively worthless (no shelves or baskets as we strip them out and throw them away), are tatty and scratched etc.
We never reclaimed any vat on purchase as they were invariably from private individuals - all receipts are kept and in the filing - and are not intended ever for sale. Do we have to assess their current market value and pay vat on that even though none was ever paid/reclaimed to begin with?
There is enough of these things knocking about to make a difference to the size of payment we have to make. It seems counter-intuitive to me to have to pay vat on items it was never reclaimed on and were never intended for sale.
We are continuing to trade and see no reason (touch wood) why that will change, so these items will not be disposed of.
You are not a business that needs to be concerned about the VAT Second Hand Good Scheme.
If you bought second hand items that did not have VAT on them when you bought them, then there is no VAT to declare when you de-register.
Per HMRC -
You’ll have to submit a final VAT Return for the period up to and including the de-registration date. You must account for any stock and other assets you have on this date if:
you could reclaim VAT when you bought them
the total VAT due on these assets is over £1,000
Don’t wait until you’ve received all your invoices before submitting your final return. You’ll still be able to reclaim VAT on anything you bought for your business while still registered once you get the invoices.
If you bought second hand items that did not have VAT on them when you bought them, then there is no VAT to declare when you de-register.
Per HMRC -
You’ll have to submit a final VAT Return for the period up to and including the de-registration date. You must account for any stock and other assets you have on this date if:
you could reclaim VAT when you bought them
the total VAT due on these assets is over £1,000
Don’t wait until you’ve received all your invoices before submitting your final return. You’ll still be able to reclaim VAT on anything you bought for your business while still registered once you get the invoices.
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