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Scrap metal dealing and VAT

One very confused person needs help!

I have a client who is about to start dealing in scrap metals. He will buy scrap items from both private individuals and businesses and sell onto another main scrap dealer for profit. I have called HMRC to clarify my understanding and I am actually now more confused.

I had hoped to use the global accounting scheme for VAT where VAT is paid simply on the difference between the purchase and selling price - as no individual item of scrap is worth over £500 this should not be a problem.

However HMRC have indicated that this would be OK when dealing with non-vatable individuals / businesses this would not be the case if scrap was purchased from another vatable business and the a VAT invoice would be issued by the seller and that this scrap would need to be tracked seperatelty when sold to the main dealer - thus possiblty becoming an admin nightmare.

Has anyone experience of this sector and the VAT treatment?

ALso I understand there are moves to change the suppy of VAT onto a reverse change basis - possibly on May 1st 2011.

thanks

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Well, re: the margin scheme

http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.por...

 

"If you have

reclaimed, orwere entitled to reclaim

VAT on an item you have purchased, you cannot use a margin scheme when you sell it. You must account for VAT on the full selling price under the normal rules, with the exception detailed below."

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By DMGbus
23rd Mar 2011 19:15

Sales and purchases need to be split as to global (margin) & non

Those purchases bought from either non-VATregistered businesses, individuals not in business or (in rare circumstances) from VAT registered buisinesses under the margin scheme (a scrap PX car from a car dealer say) CAN be treated as margin scheme purchases / sales and VAT accounted for at one-sixth of (Takings minus purchaees) of the goods concerned.

Those purchases bought with a VAT invoice showing a VAT charge are, as already stated, a separate matter.

It just means the records need to be more detailed than might have been preferable.

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