Hi
Following suggestions from last weeks post I have got potential customer who is used car dealer.He is VAT registered + Annual Sales Turnover approx £100,000.
Does anybody have similar client from same industry who can advise me on few key points while doing his bookkeeping & VAT returns etc and what mistakes to avoid for long term business relationship.
Is there anything other than fee which can impress such clients like any bundle package of services or giving out some extra without incurring huge costs?
Looking forward for help and advice.
Replies (8)
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VAT Margin Scheme
The most obvious issue is to make sure you (and client) understand margin scheme for second hand cars and his obligations under this, as well as the difference between margin scheme cars and non-scheme cars.
The important record is an effective stock-book whether manual or spreadsheet or software. If this works well, a lot falls out of this.
turnover
£100k of turnover seems very small and equates to, say, 25 cars @ £4k - in a year.
on the assumption he deals in low priced vehicles he is extremely unlikely to come across qualifying cars which do not come under the margin scheme.
Who does he use to recondition the cars? If it's a VAT registered business then he can reclaim the VAT they charge him in full.
Watch the sale of RFL's "on screen", if a price is charged he will need to account for VAT on it.
There are lots of potential things but also be aware of the rules regarding MOT's if he subcontract the MOT and then "sells" it at a profit. This would only be relevant if the MOT was done after he sold the car and he was selling it to his customer as an added service.
I get back to my original statement and think the turnover is very small except as side business.If it is a hobby watch he doesn't cause problems by giving any employees of his main businesss use of the cars without declaring them on a P11d.
hope these comments are helpfull and feel free to ask any specific questions.
Used Car Dealers
A number of us on Aweb discussed such clients a year or so ago. One poster liked her client. Most of the rest of us got out asap.
Working out the VAT on the 2nd hand car sales is very time consuming, as well as doing book-keeping for all the other elements. Many of us found our clients messy with paperwork and consequently unwilling to pay us the extra time it took to do the calculations.
I personally couldn't stand the arrogant attitude of my particular client, which probably goes with the territory!
Used Car Dealers
You're in for a world of pain. Miracle if they can a) understand VAT scheme and b) run it honestly. Every one is a ducker and diver. Usually nice guys - get fees upfront!
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Would echo comments by Moonbeam and Thegable.
You probably need to review the stock book with your client every quarter. My ducker and diver had a nasty habit of selling / PXing his scrappers for a few £hundred cash but not telling me or updating his stock book. Endless confusion then reigned when he sold the car he'd bought on PX which I knew nothing about or when I tried to clear up the clutter of older cars apparently still in stock. A few months down the line and there's no chance of them remembering the details (or, it seemed, remembering which story it was they had intended to blag you with).
Lots of paperwork
Used car dealers seem to generate an awful lot of "messy" paperwork for the amount of turnover. (for example, if they do minor repairs on the cars to bring them up to scratch, and that seems to generate lots and lots of supplier invoices for nuts and bolts etc...)
The stockbook records need to be robust to be eligible the VAT margin scheme and to be able to calculate the VAT at all.
If they offer warranties, that's an added thing to think about (not complicated, but it all adds up to extra time)
Cash deposits (and, as previous poster said, some times entire cars) sometimes get "lost" which means more time spent trying to tie everything up
And everything comes with a light sheen of motor oil.
Have fun.