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How would you define turnover for vat threshold) if you sell second hand cars?

How would you define turnover for vat threshold...

Hello.

A business selling second hand cars can use the margin scheme when calculating VAT. But in order to determine whether turnover exceeds the threshold for VAT purposes, surely you use the gross turnover figure and not the margin? 

Thanks

SA

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28th Jan 2013 21:51

I would hope it's gross proceeds otherwise i've been doing it wrong for years......

 

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By puzzel
28th Jan 2013 21:52

 

 

Correct, the threshold for VAT registration in determined on the total sales of the vehicles. However the vat element in output tax is calculated between the purchase price and the sale price. I.E if you by a car for £1000 and sell it for £1500 the the output tax is basically calculated on the additional £500 less any further adjustments.

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By DMGbus
29th Jan 2013 09:06

Selling price = turnover (not margin)

Unless the car dealer is acting as an agent of car owners (ie. selling cars on their behalf like a Travel Agent sells holidays on behalf of Tour Operators) then the selling price of the cars is the turnover for VAT purposes.

For the "agent" scenario to be applicable (perhaps appropriate for a car dealer lacking capital to fund stock, or a car broker type operation) there would need to be appropriate paperwork in place to substantiate the agency arrangements.

 

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29th Jan 2013 09:35

Thank you for all your responses - how generous AWeb members are, to respond at this busy time!

SA

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29th Jan 2013 19:48

DMG - if the dealer was acting as an agent then the second hand car scheme wouldn't apply anyway!!

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By DMGbus
29th Jan 2013 20:37

The point is...

The point is that if a car dealer acts as agent rather than principal then the margin (=his commission) is his turnover and the dealer can defer or obviate VAT registration.

An extremely relevant point in the context of the OP asking about definition of turnover for registration purposes.

As it happens, several decades ago I had a car dealer whose name was "xxxxxx Vehicle Agency" and he, lacking capital, sold cars on behalf of others and my recollection is that he did not have to register for VAT as a result of his arrangements.

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29th Jan 2013 20:40

I wouldn't disagree with your comment - it was just the Question asked stated they were using the second hand car scheme!!!

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By DMGbus
29th Jan 2013 21:09

Arrangements have an effect on registration obligation

As explained, a car dealer's arrangements as to how he deals in cars can affect his liability to register for VAT (and therefore his net profit).

Pro-active advice is about bringing pertinent points to the fore and not just robototically / tunnel-vision answering questions asked in isolation ignoring potentially important matters that could, if acted upon, benefit a trader in terms of extra profit to be had by legitimately avoiding VAT registration by changing trading arrangements.   

 

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30th Jan 2013 20:48

Well that is a massive leap - every question can invariably have alternative answers and if the question asked was - how can I structure my new car selling buisiness to avoid VAT registration I would agree with you. However, in 30+ years of dealing with the car industry I have yet to deal with an independent business who acts as an agent in selling cars - although they do exist but as you say robotically /tunnel vision answers is generally what you get on a site like this when you don't have the full facts. As we all do, if being paid for our advice, seek to explore all avenues which may benefit our clients.

However, if you feel you need to cover every possible scenario - then good luck

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25th Jan 2014 16:17

Don't you hate January?

Everyone gets short tempered instead of just accepting that forums like this are supposed to be a friendly source of help and advice.

For interest, broadening out the response in the way DMGbus did can be really useful for people who come across the thread as a result of popping something into google, but who's actual question, although related, isn't exactly the same as the OP.

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