Dealer VAT margin scheme

[legendtrader]

Hi, I have been reading a lot about this online I was wondering if anyone could clarify if the below is correct?

Assuming a dealer is on the Vat margin scheme and for arguments sake also assuming there are no cost related to the sale or business (yeah I know it's unrealistic lol). If I purchase a second hand car (which is non vat qualifying margin scheme) for £13000 and sell it for £15000 is my VAT liability going to be 1/6th of £2000 = £333.33p.?

[legendtrader]

nct001 said:

Yes. That's your output vat due on sales.



But then can claim back input vat due on purchases.

So you claim back the equivalent from say petrol adverts repairs parts materials workfare stationary etc

Basically everything except insurance and mots.

Thanks for confirming.

[legendtrader]

nct001 said:

Yes. That's your output vat due on sales.



But then can claim back input vat due on purchases.

So you claim back the equivalent from say petrol adverts repairs parts materials workfare stationary etc

Basically everything except insurance and mots.

Thanks for confirming.

[legendtrader]

Lol I knew costs would cause an argument hence I said assuming no costs. I only buy <2 years old <20k miles grade 1/2 so my car prep costs are negligible.

[legendtrader]

nct001 said:

If you buy a car for 5000 spend £1000 on it all of which is vat able and sell for £6000

You have an equal input and output liability so nothing to pay vat.

If this simple stuff guys.


As for two year old stuff I prefer to use my brain and experience last week I bought a specialist commercial vehicle 10 years old from bca online
£1300 hammer price
Fees and delivery £1658

£280 for couple of jobs and mot and got garage to check it over
Ran a mop over it and valeted seats myself.
Researched model and variant on Internet.
I never even drive it.

Listed on eBay auction as its true value is difficult to assess, sold on eBay auction for £3550.

That's good business.

It's good business until customer comes back and says it's got faulty clutch, gearbox and engine problems. Did you offer a warranty?

[legendtrader]

fridaypassion said:

I'm not sure this is quite been explained properly but this might be a more clear explanation of the margin Scheme

You buy a car for £5000
Spend £1000 including VAT on a widget for it
Sell for £7000

Your margin is still £2000 and you pay 1/6 of that £2000 margin in VAT even if you spend £3000 on a widget and loose money on the deal you will still pay 1/6 of the £2000 margin.

You do not add any prep costs (that includes fees as mentioned in the previous example) to the base cost of the car for the purposes of the margin scheme.

From the widget you paid £1000 for you will still reclaim £166.67 of VAT but this is part of your general overheads not as part of the accounting for the actual car you sold.

nct's example if reported incorrectly as I suspect is a £100 shortfall on the correct VAT figure required for HMRC.

Edited by fridaypassion on Sunday 28th August 13:51

the above is also my understanding from ready many sources on tinternet.

[legendtrader]

update - I am going to start as a sole trade with my business trading name and sell up to £83k of cars without the need for registering for VAT. If all goes well and I have made a profit I will then switch to limited company and register for VAT.