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VAT Charged On Used Items?


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I just wondered if anyone knows whether ROS charge VAT on used items or not?

 

I've had used items in the past and they have been able to provide me with an invoice showing VAT, but on my latest purchase (a loco that I have bought to demonstrate a sound decoder) I have been told that there's no VAT on their used items, its either a mistake or a recent change.

 

I'm hoping someone might know on here or that someone from Rails of Sheffield might see this and be able to explain.

 

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  • RMweb Gold
Posted (edited)

I raised this question with Customs & Excise, as it was, decades ago; when I was buying and selling model ships.  Their response was that VAT would already have been paid on the original purchase when new, therefore should not be collected on used items.  There was a term "you cannot tax tax".

I wouldn't think the tax law had changed on that, even in the new method of collection.  It's still the same tax, just another way of collecting it.

 

Mike

Edited by Royal42
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My understanding, from talking to traders, is that VAT is payable on the difference between the price at which the trader bought the goods and the price they are subesequently sold at.

 

David

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5 minutes ago, DaveF said:

 

My understanding, from talking to traders, is that VAT is payable on the difference between the price at which the trader bought the goods and the price they are subesequently sold at.

 

David

That sounds the basic calculation for taxable profits and is not the same as VAT

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5 minutes ago, LimboBrit said:

That sounds the basic calculation for taxable profits and is not the same as VAT

 

The difference between VAT and taxable profits is simple.

The customer pays VAT.

The seller pays tax on profits

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Posted (edited)
17 minutes ago, Andy Hayter said:

It is VAT

 

From the horses mouth

 

https://www.gov.uk/vat-margin-schemes

 

 

I've just done a bit of research on the margin scheme and it looks like they don't give VAT invoices with things sold using the 16.67% rate. But it depends whether thats what they are using. If they are using the margin scheme then that makes VAT invoices I've had in the past from them wrong.

 

I know someone else who runs a used models business and he pays 20% VAT on the whole amount of the sale,  the same as me, and I can claim it back if its something I have purchased for business.

 

Richard

Edited by Richard Croft
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Might be Rails system, I know our admin side will generate sale invoice and inc VAT ( it can't tell the difference between a new product brought on eBay to used one ) So it will show VAT , even though we haven't sold it with VAT within the sale on eBay.

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From https://www.gov.uk/vat-record-keeping/vat-invoices :

 

Exceptions

 

You do not need to issue a VAT invoice if:

- ...

-  you sell goods under a VAT second-hand margin scheme

- ...

 

Further, it's possible, that because most of their suppliers of their second-hand stock are private sellers, and therefore are not VAT registered, they are selling their second-hand stuff through a subsidiary company which is not VAT registered to allow them to seem cheaper.

 

£85k isn't a lot of turnover though to bother doing that before the subsidiary would have to register for VAT themselves ... so *shrug*.

Edited by Carl
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4 minutes ago, Carl said:

From https://www.gov.uk/vat-record-keeping/vat-invoices :

 

Exceptions

 

You do not need to issue a VAT invoice if:

- ...

-  you sell goods under a VAT second-hand margin scheme

- ...

Yeah thats what I found and I think its likely to be the reason. I just expected one because they gave me one on a few previous occasions for ebay bought used items

 

Richard

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43 minutes ago, Richard Croft said:

Yeah thats what I found and I think its likely to be the reason. I just expected one because they gave me one on a few previous occasions for ebay bought used items

 

I updated my post after I posted it with a more likely explanation for them saying "there is no VAT on secondhand models."

 

If they are VAT registered, using this margin scheme, it means they can choose not to provide a VAT invoice, but they should still be charging VAT (certainly, HMRC will be expecting them to pay 16.67% of the sale value to them!), and should still be able to give you a VAT invoice if you request one.

Edited by Carl
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I think you are misunderstanding how margin schemes work. If you operate under a margin scheme, and there are many of them covering various trades and professions, then you charge the full VAT on the sale ie 20% but you account to HMRC at the margin scheme rate. That varies from scheme to scheme but in this case 16.67%. This saves you having to do the VAT paid vs VAT charged calculation you simply pay 16.67% of the gross sales price (ie including the VAT) to HMRC.

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You're describing Flat Rate schemes.

 

This margin scheme definitely applies to the difference between selling price and the price paid to the seller of that second hand good, and is accounted for in your VAT return as any other sale, just at a reduced rate.  (And only applies if you weren't charged any VAT when you bought the thing you just sold.)

 

(Corrected one of my earlier posts from 16.67% to 20% in one case.)

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  • RMweb Gold
Posted (edited)

There is only one relevant VAT rate. 16.67% of the total price  including VAT is the same as 20% of the price excluding VAT.

 

eg basic price = £50. Add 20%  VAT (£10)  then total selling price is £60.

 

If you start with the total selling price of £60, then the £10 VAT element of the total price works out at one sixth £10 / £60 = 16.67%

Edited by Colin_McLeod
typo
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I'm VAT registered. A used item I bought from Rails included VAT at 20% and was reclaimable. If it had been sold on the margin scheme the VAT element would not be shown on the invoice because it is non-reclaimable.

Some companies just keep one set of books to keep things simple and charge VAT on everything new or used.

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On 11/03/2021 at 14:25, LimboBrit said:

@ 16.67% instead of the normal rate?

That is the current rate of VAT.  It's 20% on the nett price but to calculate the nett price you have to deduct 16.67% from the gross price.  So a £20 item plus VAT is £24 inc VAT but to calculate back to the £20 you would have to deduct 16.67%.

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On 19/03/2021 at 16:55, maico said:

I'm VAT registered. A used item I bought from Rails included VAT at 20% and was reclaimable

 

Are model railways part of your business? 

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1 hour ago, Wicor-Models said:

That is the current rate of VAT.  It's 20% on the nett price but to calculate the nett price you have to deduct 16.67% from the gross price.  So a £20 item plus VAT is £24 inc VAT but to calculate back to the £20 you would have to deduct 16.67%.

 

This is called "the VAT fraction". As stated here, it's the proportion of the VAT-inclusive price that's actually made up of the VAT.

 

These days it's a doddle to work out (as has been shown in this thread, it's 20/120 - where 100 is the price before VAT - or 1/6 or 16.67%). When I joined Customs & Excise, many years ago, the standard rate of VAT was 17.5% and the VAT fraction was 7/47. It's striking just how few people can work out 7/47 of an amount in their heads.

 

As an aside, it's stated above that "you can't tax tax". In fact, VAT is a tax that can be applied to tax in certain circumstances. When you import goods, the value for VAT includes the cost of customs duty and other similar charges, so you actually pay tax on those taxes.

 

Jim

Edited by Jim Martin
To add the last paragraph
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I dug out a Hatton's receipt from 2019 and the used items had the vat amount shown for each item. That purchase was from their website.

Rails seem to use eBay for a lot used sales, they may be accounting for VAT in a different way.

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On 21/03/2021 at 22:02, maico said:

Rails seem to use eBay for a lot used sales, they may be accounting for VAT in a different way.

Agreed - they must be adding about 50% based on their prices.

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On 21/03/2021 at 16:38, Jim Martin said:

 

 

As an aside, it's stated above that "you can't tax tax". In fact, VAT is a tax that can be applied to tax in certain circumstances. When you import goods, the value for VAT includes the cost of customs duty and other similar charges, so you actually pay tax on those taxes.

 

Jim

VAT is also paid on fuel after fuel duty (a tax) has been added

When purchase tax was first abolished in favour of VAT, on cars a new  type of car sales tax was levied before VAT was added to make up some of the difference in tax take.

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17 hours ago, Hal Nail said:

Agreed - they must be adding about 50% based on their prices.

 

That's the figure Hattons seem to use. I had a Rivarossi loco that came in as part of a collection I bought for myself. It was of no interest to me, so punted it to them for £40. They sold on for £80 inc. 20% Vat. on their website.

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3 hours ago, maico said:

 

That's the figure Hattons seem to use. I had a Rivarossi loco that came in as part of a collection I bought for myself. It was of no interest to me, so punted it to them for £40. They sold on for £80 inc. 20% Vat. on their website.

 

 One model railway dealer I knew quite well (now deceased) used to buy at one third of list to sell at two thirds of list.  That was for an "average" used item that was not a "red hot collectable".

 

I tend to assume that that is the starting price and with a bit of luck that can be negotiated down.  Sometimes I buy, sometimes I walk.

 

Les

 

 

 

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