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Is sale of scrap metal VATable?

Is sale of scrap metal VATable?

Client occasionally receives money for scrap metal but says he never receives a receipt or any paperwork and is not sure whether he should be paying VAT on these proceeds?

Does anyone have a link to which a spectrum of "specific" items can be reviewed for their VAT treatment or is it a case of telephoning the VAT advice line?


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By Anonymous
30th Sep 2008 13:39

Margin Scheme, Global Accounting Scheme
The sale of scrap may well qualify for special VAT relief under the Margin Scheme further assisted by using the Global Accounting Method where qualified to do so.

This is particularly useful when the scrap is bought without VAT as the output tax is computed on the selling price minus the purchase price rather than on the selling price.

I believe the individual purchased item has to cost £500 or less to be dealt with under the global accounting scheme.

The advantage of the global accounting scheme is that record-keeping is simplified, ie. no stock book has to be maintained.

When the goods are sold there is no VAT invoice to the customer, instead an invoice endorsed "sold under the margin scheme" (or something similar) is issued.

The customer cannot reclaim VAT back on a margin scheme purchase, but they can themselves sell the goods on under the margin scheme thus they then pay VAT on the margin rather than full selling price.

Whether the above applies in your case depends upon how the scrap is acquired by the seller in the first place.

If not qualifying for the margin scheme then I would expect the sale to be fully liable to VAT, unless as mentioned already it's gold where a special sceme is available whereby the bullion dealer buying the scrap gold self-accounts for the output tax that otherwise would be payable by the seller.

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29th Sep 2008 12:26

Is Neill's scrap metal precious? If so that is probably the reason for no VAT

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28th Sep 2008 19:42

The default is that all supplies are subject to standard rate VAT unless specifically zero-rated, reduced rated, exempt or outside the scope of VAT. I am not aware of any specific exception for metal, scrap or otherwise. If your client is VAT registered (or would exceed the current registration threshold of £67,000 if his sales of scrap metal were included with his other sales), he must account for VAT on his sales of scrap metal at 7/47 of his proceeds. It is up to him to raise a VAT invoice if the customer requests one, but the absence of paperwork does not avoid the legal requirement for him to pay over VAT on the sale.

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28th Sep 2008 17:14

you know
your advice should be fot your client to keep accurate records of sales which includes sales of metal scrap. There is little doubt that these sales also need to be treated as VAT inclusive. Why doesn't he issue invoices to the scrap dealer and add VAT to the amount he gets paid?

You could have an MLR problem if your client doesn't play ball

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