Selling Merchandise

Selling Merchandise

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Hi,

I help out some of my friends who run a company who puts on monthly events. As part of their show they buy in cheap merchandise and resell via a merchandise table for a profit during the show.

They have only recently incorporated and i was wondering if they have to do anything since they are selling goods as part of their event?

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By George Attazder
26th Jun 2012 13:03

I'd like to answer your question...

... but I'm not sure what it is. What do you mean by "if they have to do anything?".

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By Denzil
26th Jun 2012 13:15

Sorry about that, i'm not from a finance background so apologies for the confusion.

Do they need to charge VAT on them?

At the moment all takings from the events are lumped into a Show Income catagory.

Do they need to seperate it out and treat each aspect differently?

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By George Attazder
26th Jun 2012 13:45

Possibly

It's still a bit vague, because I'm not sure if they're VAT registered and whether the admission income is standard-rated or whether the income from the merchandising income is standard-rated.

If both are standard-rated, then it doesn't really make any difference in respect of whether they need to register for VAT and if they are VAT registered (or when they are, if they ever have to) how much VAT they will need to account for.

The important thing to be aware of is that VAT is charged on supplies. If you have two separate supplies - admission to event, buying your (adult's) Engelbert Humperdink T-shirt, then there are two separate supplies (in this case both having the same VAT liability - possibly, see below!).

If the two things are provided together - admission with complementary (adult's) Engelbert T-shirt - there's a single supply that carries the liability of the main supply (standard-rated, subject to my killer point below).

The problem would come if there are two separate supplies with different liabilities - admission to concert (probably standard-rated), then buying a packet of Engelbert brand cornflakes (zero-rated). If you lump the two together, then you're paying too much VAT.

On the other hand, some might argue that an Engelbert Humperdink concert is a cultural event and so exempt. So now when you go to your Engelbert concert and buy your T-Shirt, the admission's exempt, but the T-Shirt's taxable and if you lump them together, you might fail to register for VAT.

Throw into the mix that adults' Engelbert T-Shirts are standard-rated, whereas children's Engelbert T-Shirts (bless them!) are zero-rated, you might conclude that perhaps you ought to get someone with a finance background (there's a name for such people, but it's escaping me right now) involved, at least at the outset, to steer you in the right direction.

If it all sounds too satirical, I have to tell you, that it's all true. Well Engelbert Humperdink brand cornflakes may have been stretching things too far.

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