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Calculating profit trading under VAT margin scheme

Calculating income tax profit, trading under VAT margin scheme.

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I retail used goods and so operate under the VAT margin scheme.  Therefore I pay VAT on the margin between the purchase and sale price of my items.

My question is, when calculating my profit for income tax purposes, should the VAT that I have collected and paid to HMRC each quarter on those margins, be deducted from my profits?  

It doesn't seem right that I would pay income tax on VAT I've collected for the government, but I'm not sure as I cannot find an answer anywhere.

Thanks for any help.

Replies (12)

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By Tim Vane
18th Jan 2020 21:11

Your accountant will know the correct treatment of expenses and income for your accounts and tax. Just leave it to them and be sure you get the books to them a timely fashion.

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By Skiny
18th Jan 2020 22:10

I thought so too, but I don't see the VAT I have paid through the margin scheme reflected anywhere in what they've sent.

I will of course be asking them after the weekend, but I'm curious now and wondered if anyone knew.

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Replying to Skiny:
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By JoF
18th Jan 2020 22:43

Skiny wrote:

I thought so too, but I don't see the VAT I have paid through the margin scheme reflected anywhere in what they've sent.

I will of course be asking them after the weekend, but I'm curious now and wondered if anyone knew.

I would suggest you get a full info pack to them then, to include your vat returns, vat calculations, stockbook etc. Otherwise they will plaiting air.

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Replying to JoF:
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By JoF
19th Jan 2020 10:49

'They've sent'

My apologies, OP. I misread the above.

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Replying to Skiny:
RLI
By lionofludesch
19th Jan 2020 09:59

Skiny wrote:

I thought so too, but I don't see the VAT I have paid through the margin scheme reflected anywhere in what they've sent.

I will of course be asking them after the weekend, but I'm curious now and wondered if anyone knew.

Your sales and, indeed, your expenses should be shown net of VAT.

What you have seems correct to me.

But by all means ask the question. It's good that you take an interest and don't just sign off stuff that's put in front of you. Ignore Grumpy Tim and Grumpy JoF.

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Replying to lionofludesch:
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By JoF
19th Jan 2020 11:05

Getting gumpier by the day, going to change my name to Victoria Meldrew.

It's going to get worse today, didn't go shopping for chocolate and wine for later due to coolant warning light on my car.

So now I'm grumpy due to having to sort my car out myself as my man is not around to do it AND having no wine/chocolate for later.

Grumpy as grumpy can get #

Can you drive a BMW with a low coolant light? Or can it bust the cylinder head?
Thought I would ask on here, given some of the other nonesense we see. Besides on the piston heads forum they talk about tax issues, so why not hey? I didn't mean the word 'hey'. At last it wasn't at the start of the post!

# not technically true, I can get a whole lot grumpier.

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Replying to JoF:
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By Accountant A
19th Jan 2020 11:35

JoF wrote:

Can you drive a BMW with a low coolant light? Or can it bust the cylinder head?

I think if it's a yellow light it's a "warning" rather than stop immediately. I wouldn't drive too far, however. If there's a local Halfords open, they may top it up for you but you obviously need to establish where the coolant has gone.

Bizarrely, it happened to me last year. Needed topping up with at least a pint of coolant but no problem before or since and no evidence of a leak.

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Replying to Accountant A:
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By JoF
19th Jan 2020 12:25

Thank you AA. No lights on - its the iDrive that has flashed the (dire) warning message up. Temperature gauge showing now issues.

When I've stopped being a flappy girly not wanting to open the bonnet (after several brews) I will open it and check. Nowhere near a Halfords or other such place unfortunately (of the joys of living in the sticks) but I have a mechanic on speed dial, just not on a Sunday so might just wait until he is available!

Thanks again.

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Replying to JoF:
Hallerud at Easter
By DJKL
19th Jan 2020 18:37

Somewhat late in day but if you have a garage then parking in it and sliding a newspaper under car on the garage floor can sometimes help tracing issue of coolant loss (though cars are infuriating as leak often is not actually above where the coolant drips)

It is better to check when coolant is hot and under pressure (after driving) so likely too late this time.

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Replying to DJKL:
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By JoF
19th Jan 2020 19:28

Ah, thank you DJKL. Im not even sure where to put the replacement coolant - looks like I've got double coolant tank! Picture taken and winging its way to mechanic and BMW as we speak. But I will try your newspaper idea once its filled up again.

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Replying to JoF:
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By atleastisoundknowledgable...
20th Jan 2020 08:26

JoF wrote:

No lights on - its the iDrive that has flashed the (dire) warning message up.

Our iDrive started playing up a few months ago. It’s possible that it’s not the coolant, but your iDrive might need resetting on them machine’. Hopefully not as it’s was a few hundred quid and took about 5 hrs plugged in at the garage (or so they said).

Just putting it out there.

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Replying to atleastisoundknowledgable...:
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By JoF
20th Jan 2020 12:58

Ouch!! Thank you for the info ALISK. Just been to BMW - all topped up, checked for leaks and idrive ok and all for free (not often you can say that is it!). Plus I now know that I have a double tank for coolant. Phew.

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