Secondhand goods and VAT

ratsam

Ok quick question. I work in retail where a customer can trade a used item against a new item. So lets say the customer buys a new camera for €1000 but trades in a used one and we allow €400 on the used item. If we then sell the used item for €500 are we paying VAT on this sale? Or are we paying VAT on the difference (€100)....? Seems odd that the used item would have already have had VAT applied and now we'd be charging it again?

Curious...!!

Rats

myshirt

Short and sweet answer is VAT already paid on that item, so not in the VAT net.

Check in the tax forum for better input. You don't want to get VAT wrong. Trust me.

scwazrh

The rule I always use is If I have a vat receipt for the purchase , I claim it , if not I don't.All sales include vat once your vat registered.

So in your example you don't have a vat invoice purchase receipt for 400 so you can claim nothing here , but you do issue a vat sales invoice for the 500 so you pay the vat on that amount.

I may be wrong with this but from my experience if you have no vat receipt with valid vat number you cannot claim the vat on a purchase.

dbran

Assuming that you are a dealer in second hand goods the margin scheme should apply and the VAT is on the margin. So when you sell the second hand camera the VAT is on the margin which is €100 ie the difference between €500 and €400. The €100 is the VAT inclusive price so the VAT will be €18.70

http://www.revenue.ie/en/tax/vat/leaflets/margin-scheme-second-hand-goods.html

Regards


dbran

paul71

There is also a global scheme in operation where the trade is in low value items and it is not practical to keep records of and track each purchase to each sale thus determining the margin. By this method the revenue will agree what the overall margin is and apply that rate when determining the VAT rate.

This is commonly used in the retail trade for sale of second hand books and second hand computer games.

ratsam

Thanks all for your help...! I'm going to sit with our accounts dept and try to work this out. Hopefully the margin scheme will work but from reading about it I'm not so sure.

Thanks again

Rats

ratsam

So after speaking with Rev it looks like the margin scheme will apply..! Happy days.