Car trading through established ltd company - poss?!
Discussion
I have a trading ltd company at the moment, and am looking to supplement income through trading in vehicles (1 a month most likely).
Ltd company is registered to FRS for VAT (under general business consulting, circa 11% without discount)- how will this effect it if at all?
How do i go about charging/reclaiming VAT if i need to? Do you have to sell them with VAT, as i've never seen it mentioned when i've bought privately?!
Accountant can't give me a straight answer over the phone
Any help appreciated!
Ltd company is registered to FRS for VAT (under general business consulting, circa 11% without discount)- how will this effect it if at all?
How do i go about charging/reclaiming VAT if i need to? Do you have to sell them with VAT, as i've never seen it mentioned when i've bought privately?!
Accountant can't give me a straight answer over the phone
Any help appreciated!
Not much of an accountant then 
There are three issues araising from your question:
VAT
Taxation
Accounts
On the VAT front, car sales do involve accounting for VAT libilities on the part of the seller. There are different rules for selling brand new cars and selling secondhand cars.
Brand new cars are charged to VAT in the normal way. In other words, if you were selling a new car for £20,000 VAT Exclusive, the VAT Inclusive sale price would be £23,500. You could reclaim any VAT you were charged by the manufacturer when the car was originally bought by your business.
Secondhand cars are sold under a VAT Margin scheme. Generally, when a secondhand car dealer buys a car from a customer, there will be no VAT charged on the purchase price when he buys it - so there is no Input VAT to reclaim. When the dealer sells the car on, he only charges VAT on the DIFFERENCE between what he bought the car for and what he sells the car for e.g xar bought for £10,000 and sold for £15,000. The profit (i.e. "margin"
is £5,000. The VAT content of the £5,000 profit is £744.68 (£5,000 x 17.5/117.5). The VAT Payable on the sale is therefore £744.68.
As you can see, there si no way you could operate the Flat Rate Scheme on car sales as the flat rate percentages just cannot be accomodated into this very specific VAT area.
This would have ramifications for the rest of your business as with FSR you would not normally be reclaiming Input VAT. The car sales business would need to be accounted for completely separately with relevant Input VAT being reclaimed.
Taxation:
The car sales operation would be a separate "trade" for tax purposes and therefore the profits and/or losses arising from the two separate operations would need to properly identifiable. This is a requirement under Corporation Tax and Income Tax as the utilisation of losses arising in different trades is strictly governed vby tax regulations.
Accounts:
To be able to properly differentiate the two trading activities, the internal bookkeeping would need to be robust enough to separate correctly income and expenditure for the two trades. That would also have feedback into the VAT and tax requirements.
There would also be some Companies House requirements and Accounting Standards requirements regarding disclosure of the two activities in the statutory accounts.
There are three issues araising from your question:
VAT
Taxation
Accounts
On the VAT front, car sales do involve accounting for VAT libilities on the part of the seller. There are different rules for selling brand new cars and selling secondhand cars.
Brand new cars are charged to VAT in the normal way. In other words, if you were selling a new car for £20,000 VAT Exclusive, the VAT Inclusive sale price would be £23,500. You could reclaim any VAT you were charged by the manufacturer when the car was originally bought by your business.
Secondhand cars are sold under a VAT Margin scheme. Generally, when a secondhand car dealer buys a car from a customer, there will be no VAT charged on the purchase price when he buys it - so there is no Input VAT to reclaim. When the dealer sells the car on, he only charges VAT on the DIFFERENCE between what he bought the car for and what he sells the car for e.g xar bought for £10,000 and sold for £15,000. The profit (i.e. "margin"
is £5,000. The VAT content of the £5,000 profit is £744.68 (£5,000 x 17.5/117.5). The VAT Payable on the sale is therefore £744.68. As you can see, there si no way you could operate the Flat Rate Scheme on car sales as the flat rate percentages just cannot be accomodated into this very specific VAT area.
This would have ramifications for the rest of your business as with FSR you would not normally be reclaiming Input VAT. The car sales business would need to be accounted for completely separately with relevant Input VAT being reclaimed.
Taxation:
The car sales operation would be a separate "trade" for tax purposes and therefore the profits and/or losses arising from the two separate operations would need to properly identifiable. This is a requirement under Corporation Tax and Income Tax as the utilisation of losses arising in different trades is strictly governed vby tax regulations.
Accounts:
To be able to properly differentiate the two trading activities, the internal bookkeeping would need to be robust enough to separate correctly income and expenditure for the two trades. That would also have feedback into the VAT and tax requirements.
There would also be some Companies House requirements and Accounting Standards requirements regarding disclosure of the two activities in the statutory accounts.
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