VAT on second hand goods

C

Compass

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I've searched and this has been asked before in at least one thread but no answers that I can see:

Should VAT be charged/paid in relation to second hand goods? I think there is some sort of margin scheme dealing with higher value items or perhaps goods that rise in value?

But how about if I say purchase a second hand inkjet printer from a retailer registered for VAT? In this case, the VAT has already been paid by the original purchaser and is now being sold again. Should I have to pay VAT on it a second time?
 
Compass said:
But how about if I say purchase a second hand inkjet printer from a retailer registered for VAT? In this case, the VAT has already been paid by the original purchaser and is now being sold again. Should I have to pay VAT on it a second time?
Click to expand...

Your overthinking this. If you as a VAT registered person purchase something from another VAT registered person then they charge you VAT and you recover it and then you charge VAT on the sale. Thats how VAT works.

The issue is where you are buying secondhand goods from a private individual. They have paid VAT on the product and can't charge you VAT as they are private individuals, then when you go to sell it if you have to charge 23% VAT on the item then you have no profit.

The margin scheme applies so that you only have to pay VAT on the profit element of secondhand goods. You should seek professional advice.
 
Hmm.

Not sure if I am over thinking.. Suppose the hypothetical printer in my example retailed originally at €123 i.e. €100 + €23 VAT and the first purchaser paid this. This retailer or another retailer then acquires this as a used printer and resells it. Suppose I'm a consumer and not VAT registered. Why should I pay VAT on goods on which a sales tax has already been levied? Suppose the retailer in this case wants €50 for the printer - can they legitimately charge €61.50 i.e. €50 + €11.50 VAT.

This doesn't make much sense to me?

Or is VAT a tax that just keeps on giving and giving.......
 
Ignore the original price.

He buys the used printer for €40. He sells it to you for €50.

He has charged you €1.87 VAT on his €8.13 gross margin on the deal.
 
And if he picks it up for €0 and says to himself, I can make €50 on this printer, the consumer pays €61.50?

Not really an incentive for the public to buy from VAT registered businesses perhaps? Apart from some level of limited guarantee that the retailer might give on the used item. Hmm.

VAT / Sales Tax is a very simple thing in theory but there seems to be a lot of dubious areas in practice. I suppose these are thrown up by all the variations in how it's applied and reliefs and so on.

Also a moral here for the consumer, always ask for a VAT receipt (particularly with cash businesses) and check wrt second hand goods, that one is only being charged VAT on the profit margin.
 
There are no dubious practices in the area of VAT. Ultimately, VAT is borne by the end consumer or unregistered businesses.
Let's take the example of a printer.

Manufacturing Ltd acquires raw materials and makes and sells a printer to The Print Shop Ltd. Manufacturing Ltd. charges 200 plus VAT and pays €46 to Revenue. The Print Shop Ltd claims the VAT is paid in its VAT return, minus €46. Revenue has therefore received nothing.

The Print Shop Ltd sells the printer to Numbers Accountants for €250 plus VAT. The Print Shop Ltd pays Revenue €57.50 in VAT. Numbers Accountants claims back the VAT and again there is no gain to Revenue.

Numbers Accountants decided to upgrade their printer and packs its off to Mr. Second Hand Man. They sell it for €50 and pay VAT to Revenue of €11.50 and Mr. Second Hand Man, assuming he is a chargeable person, claims the VAT. Still nothing for Revenue.

Mr. Second Hand Man sells the printer for €60 plus VAT to Ms. Jane Bloggs, private individual. He then returns the VAT of €13.80 to Revenue and the Collector-General finally gets a few quid!

The margin scheme does not apply to transactions between chargeable persons. A trader may only apply this scheme where the purchases have been made from persons who are not chargeable persons, ie not VAT registered. A trader would be at an unfair disadvantage if the purchases he made were not eligible for a VAT input but he had to pay VAT on all his sales. The second hand margin scheme applies generally to jewellery, furniture, etc that would not normally be entitled to an input of VAT by the end-user.

Invoices issued under the margin scheme should note that this scheme is in use and that the buyer is not entitled to claim a VAT input on the goods. You may often see this with second hand car parts purchased under the global accounting scheme or second hand machinery.

The Tat Shop buy an old painting of a crying kitten from me for €50. They sell it to you for €75. Revenue receive €4.67.

Sorry if I have bored anyone but I hope this is useful!
 
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