UK VAT Margin Scheme

[Jpeterson85]

We are using the VAT margin scheme for memorabilia (second hand goods) we buy and sell.
My question is what we can consider as part of the VAT margin scheme?

For example, we purchase an autograph for £100.00.
Before selling, we frame the item by our framing supplier at a cost of £50.00.
When calculating the VAT margin scheme, can we consider the cost as the total of the two i.e. £150.00 in the example above?
So if the item sold for £300.00, we would pay VAT at 16.67% on the difference between the purchase and selling price, £150.00 VATABLE AT 16.67 = £21.43 VAT payable using VAT margin scheme.

My question is can we consider the framing costs towards the VAT margin scheme or not?
Please note, one of our framers charges us VAT, the other does not. I understand that if we are charged VAT on anything then this is not applicable for the VAT margin scheme however since one of our framers is non VAT on invoices so can this be considered?

 

[Werner Reisacher]

Your first assumption on how to calculate your VAT is correct.
With regards to purchases on which VAT was charged by a vendor who is adding "services" to the product he sells you, the VAT becomes part of your purchase price. You cannot claim that VAT back.
The following two URLs will give you the details on such issues.

VAT margin schemes

How to use VAT margin schemes - records you need to keep, invoicing and VAT return reporting

www.gov.uk

What happens if an item is sold under the VAT Margin Scheme? - Auctionet

Auctionet holds online auctions with furniture, design, art and everyday antiques. We unite European auction houses. Bid online today.

auctionet.com

 

[Jpeterson85]

@Werner Reisacher Thank you for your reply. The links do not clarify whether or not we can include the framing costs towards the vat margin scheme. Vat margin scheme is strictly applicable to second hand goods. What we are doing is taking the second hand goods and framing it to then sell. I am trying to find out whether all of these costs together can make up the vat margin scheme.

I.e. vat margin scheme calculated by:
selling price of second-hand item
minus
second-hand item cost + framing cost

 

[Werner Reisacher]

This one deals with the issue of items purchased on which VAT was paid. (framing costs)

Self-Employment Survival Guides

Find the answers to all your questions about being your own boss - from setting up as self-employed and getting paid to claiming expenses and managing taxes.

goselfemployed.co

 

[Jpeterson85]

@Werner Reisacher Thank you for your help with this.
I can see on that link it says the following:

What Purchases To Include In Your Margin Scheme Calculations

The VAT Second Hand Margin Scheme applies to any sales and purchases that meet the criteria of the scheme.

However, you may have paid for additional things which have VAT on them.

You can reclaim VAT you have paid on any business overheads, repairs or accessories you buy just like anyone else who is on the standard VAT scheme.

Just make sure you do not include any of these costs when you work out your second-hand margin for VAT purposes.

This implies the following:

1) If we are charged VAT on framing costs then we can reclaim the VAT back on those framing costs.

2) If we are not charged VAT on framing costs then nothing can be claimed on this and framing costs cannot be considered as part of the margin scheme to calculate the total cost of the item towards the VAT Margin Scheme.

I am not entirely sure if this is a trusted source - do you know of any government legislation stating this?

 

[Werner Reisacher]

Not without doing the google search. I have the above URLs in my own archive.

 

[Jpeterson85]

Hi, I just wanted to open up this thread again to see if anyone had any other advice on this with valid information stating the above?