A company whose trade is retail of electrical light fittings is registered for VAT.
They sell a company van to an unconnected third party. The Sales invoice has VAT on it, is this correct?
Replies (6)
Please login or register to join the discussion.
Not necessarily
You could just add VAT in the usual way, or you could use the margin scheme when you sell it.
http://www.hmrc.gov.uk/vat/start/schemes/margin.htm
Make sure you include the correct wording on the sales invoice about not reclaiming vat though.
How did they buy the van?
I may be completely wrong, but I seem to recall that if they bought the van second-hand from a dealer operating the margin scheme and were therefore unable to reclaim any input VAT on the purchase, they must apply the margin scheme when they sell it - presumably for less than they paid for it and hence, no VAT.
clarification
Euan makes the point better than me. To use the margin scheme, they would need to have acquired the van second hand themselves without reclaiming vat. But I don't think the margin scheme is compulsory - they could add vat at 20% to the whole lot if they prefer...
safest
I don't think your client will be penalised for charging VAT. If the buyer accepts, then why worry?
We are a company that was vat registered when we purchased a van 3 years ago and we reclaimed the VAT. We are not in the business of selling vans this is 1 of 2 works vans that we own. Now, 3 years we are no longer VAT registered and we are going to sell the van. I am assuming that because we are not VAT registered we do not have to charge VAT and that we are not liable for the VAT re reclaimed. Is that correct?