Please accept my apoloies if I have missed any specifics, this is my first post. I am trying to clarify a scenario.
Gov.uk has the specifics for when you can/can't use Global Accounting and when this falls back to using the Margin Scheme.
- purchase an eligible item for £500 or more, and the item is made up of several components valued at less than £500 (and you sell these componentsindividually).....then you can account for the sales under GAS
- purchase an eligible item for £500 or more, and the item is made up of several components valued at less than £500, and you sell the item in the same state as it was purchased.....then you cannot account for the sale under the GAS, you may account for the sale under the Marging Scheme.
My question is specific to a scenario where you purchase an eligible item for more than £500 made up of several components valued at less than £500, but you sell these components in various ways. For example, I buy a collection of various stamps for £3,000. I then sell some items (components) separately, for less than £500 each, but sell two separate 'lots' for more than £500 each. If it was just a simple buy and re-sell it would be easy enough to account for this under the Margin Scheme but this looks like it would be more complex and harder to keep track of under the Margin Scheme if there are several components involved. I am therefore wondering if, in this scenario, it could be accounted for under the Global Accounting Scheme.
Any advice would be greatly appreciated.
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Replies (3)
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The £500 test applies to the purchase price. I don't think that is a problem with the scenario you describe.
The other test is whether you can readily calculate output tax on an item by item basis. If the £3,000 purchase price can easily be allocated per item, then you should use the normal Margin Scheme. If not, then use Global Accounting.
If you are using accounting software, you should be able to use either option. The only benefit then of GA is the automatic relief on items sold at a loss.
Thank you Les for your speedy response.
I should have explained that I am newly VAT registered so am trying to understand things a bit better.
I can often buy larger lots over £500, but at the same auction also buy smaller lots for under £500. This alone may make splitting between Global Accounting and Margin Scheme tricky.
The difficulty really is in allocating a price to each component and so combined with the other issue above, it seems a very complicated way of doing things.
You don’t see any issue in keeping this sort of scenario under Global Accounting then? Ultimately, there will be no difference on VAT paid.
Thanks again!
It is always easier to use one scheme rather than two. If you can allocate purchase prices to each item, and the VAT payable is the same either way, perhaps stick with the Margin Scheme. The main additional documentation is a stock book.
Have a read of HMRC Notice 718, chapter 5 for the rules about that.