Vat and Trade-ins

Just a question. I've frequented shops like Gamestop, CEX and others that offer a lower amount in cash and a higher amount in store credit for items brought in by the public. I was wondering, how is the whole store credit thing figured out in terms of tax, specifically VAT? Is VAT only charged on items that are purchased with money?

I give them x in exchange for store credit worth €50 (which they will go on to sell for €100) and I purchase y (which was acquired by the shop in exchange for €25 store credit with someone else) for €50 with my store credit. Because it is 2nd hand goods from individuals, could they operate the margin scheme? How would they be able to do that if they aren't really acquiring their stock from individuals with cash? I can't see how the credit note could act as cash from a tax perspective.

Again, if they buy x for €25 from me, I walk away, and then they sell x on for €100 to someone with money, they would then owe 23% of the €75 difference, which would be €17.25. They give me a credit note for X worth €50, and then sell it on for €100. Is their a cash value attributed to the credit note? Would every item in Gamestop have to be tracked or do they just not bother with it and pay the 23% from their turnover and leave it. Have I just confused myself?

It would be great if anyone could help/answer. Cheers.

blipsblips said:

Is VAT only charged on items that are purchased with money?

Click to expand...

No, VAT applies to barter and other non-cash transactions.

Hmmm...

So I am starting an antique shop and have been given an empty shop to use, for free. I'm only starting off and have no stock, and use cash to buy a nice wooden table from an individual for €2500. I then put the table in the shop window for €10000. Later that day, someone comes in with another table worth €20000 and he wants to sell it to me. I offer the man the option of either €5000 in cash or €10000 in store credit. He takes a liking to the table in the window, accepts the €10000 credit and leaves with the table in the window. I then put the new table in the window with a price tag of €20000. One hour later, I sell the table for €20,000.

Considering the margin scheme:

Would I owe €1,725 for the first table? €10,000 (credit note) - €2500 (cost) = €7500 x 23%.

What would I owe for the 2nd table? How much did it really cost me?

Are you selling shares in this business???

The VAT in included in the profit for the first table so it's €7500 /1.23 x .23 €1400 odd.

So you have valued the second table at €10,000 so that's the cost of the third table. So now you have made €10k on the third table.

If you had put a value of €5k on the second table then the profit would be €15 on the third and you would you would owe more VAT on that sale. It all washes out in the end.