VAT on used gear

specialman

specialman

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Pat MacInnes
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Seen quite a few classifieds listing where people are selling gear, stating that it includes VAT that can be claimed back. I was under the impression that VAT didn't apply to used gear, although resellers still have to pay a form of tax when offering used equipment for sale.
 
If it was originally purchased by a VAT registered business with VAT paid & claimed and that same business is now selling it on then yes they have to add VAT.
 
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I can confirm that you've got to pay VAT on used gear.

I just brought a 300/4 and 24-70/2.8 which I've had since 2009 and sold to TP members in UK. Upon entry to UK, I did declare them, and while the custom's official didn't want to take my money he eventually did given the fact that each item was over £340. Although he didn't charge me custom duty (whatever that's meant to be :shrug:)
 
specialman said:
Seen quite a few classifieds listing where people are selling gear, stating that it includes VAT that can be claimed back. I was under the impression that VAT didn't apply to used gear, although resellers still have to pay a form of tax when offering used equipment for sale.
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As I understand it, if the seller is VAT registered then they will have to charge VAT if the sale is part of their business activities, ie. they buy and sell used goods or if they are selling an asset of their business where the VAT on the purchase was reclaimed by the business.

New/used doesn't make a difference for VAT purposes. I can't think of another sales tax that would apply.
 
Just to clarify...

I'm trying to ascertain whether the buyer can claim the 20 per cent VAT back that was applied by the seller of the secondhand product. As I was led to believe, the seller (if VAT registered - say a shop like MPB for example's sake) applies VAT to the secondhand product but the buyer cab't claim VAT back because it was already claimed when the product was bought from new. Is that right?

The reason is my boss has said that we can't claim back VAT as a business if we buy something like a used camera so if that camera costs, say, £500 then the company pays out £500. If we bought one new for £600 then we can claim the VAT back, so the camera only then costs £480, making a new camera better financial sense.

I'm absolutely pap at anything financial, hence the stupid question :lol:
 
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If you're paying VAT on used goods and have a VAT receipt to support that, then I can't see why you can't claim that VAT back if you're buying it for your business - but I'm no accountant.
 
100% you can claim the VAT back.

By the same token the goods have already been sold once with VAT applied by the original retailer.
 
It's not as always as simple as this, folks.

Most companies, like mine, have an "ordinary" VAT registration. (I don't know whether there's a more technical name for it.) They can reclaim VAT when buying goods, but if they subsequently sell those goods then they must charge VAT on the selling price.

However, many companies who do a lot of buying and selling used equipment will operate under the "margin scheme" for VAT. This means they can't claim back VAT on goods they purchase, and they only charge VAT on the proportion of the selling price which represents their profit.

I know for a fact that MPB Photographic, who were mentioned earlier, operate under the margin scheme.

Suppose you buy a used lens from me and another from MPB, and you pay £660 each time. I have to charge VAT on the full selling price, so the £660 you pay me is actually £550 + £110 VAT. If you're VAT registered, you can reclaim the £110. However MPB only charge VAT on their profit, so how much that is depends on what they paid for the lens. If they bought it for £600 then the selling price includes £60 profit which is £50 + £10 VAT, so the total selling price is £650 + £10 VAT. If you're VAT registered you can reclaim the £10.

In either case you should get a VAT receipt showing how much VAT you've paid. Of course, if the retailer uses the margin scheme then you won't necessarily know how much VAT there is before you buy.
 
The margin scheme only works if the retailer buys from non registered sellers, ie typical amateur photographers. This means that there is no input VAT for the retailer to claim.

It also only really work when the retailer sells onto non VAT registered users.

A few years ago, one of the "pro" dealers was making a big issue out the fact that they weren't operating the margin scheme, and thus VAT registered users could reclaim the VAT on used equipment they sold.
 
StewartR said:
It's not as always as simple as this, folks.

Most companies, like mine, have an "ordinary" VAT registration. (I don't know whether there's a more technical name for it.) They can reclaim VAT when buying goods, but if they subsequently sell those goods then they must charge VAT on the selling price.

However, many companies who do a lot of buying and selling used equipment will operate under the "margin scheme" for VAT. This means they can't claim back VAT on goods they purchase, and they only charge VAT on the proportion of the selling price which represents their profit.

I know for a fact that MPB Photographic, who were mentioned earlier, operate under the margin scheme.

Suppose you buy a used lens from me and another from MPB, and you pay £660 each time. I have to charge VAT on the full selling price, so the £660 you pay me is actually £550 + £110 VAT. If you're VAT registered, you can reclaim the £110. However MPB only charge VAT on their profit, so how much that is depends on what they paid for the lens. If they bought it for £600 then the selling price includes £60 profit which is £50 + £10 VAT, so the total selling price is £650 + £10 VAT. If you're VAT registered you can reclaim the £10.

In either case you should get a VAT receipt showing how much VAT you've paid. Of course, if the retailer uses the margin scheme then you won't necessarily know how much VAT there is before you buy.
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Not all this info is correct.
 
mortimerhill said:
The margin scheme only works if the retailer buys from non registered sellers, ie typical amateur photographers. This means that there is no input VAT for the retailer to claim.

It also only really work when the retailer sells onto non VAT registered users.
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That's true, though in the context of this thread I would suggest these are considerations for the retailer rather than the customer.
mortimerhill said:
A few years ago, one of the "pro" dealers was making a big issue out the fact that they weren't operating the margin scheme, and thus VAT registered users could reclaim the VAT on used equipment they sold.
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That's interesting. (I was a bit confused at first though because the last "they" is a bit ambiguous!) Can you remember which dealer that was?
 
Sorry it was late and I was cream cracked.

StewartR said:
It's not as always as simple as this, folks.

Most companies, like mine, have an "ordinary" VAT registration. (I don't know whether there's a more technical name for it.) They can reclaim VAT when buying goods, but if they subsequently sell those goods then they must charge VAT on the selling price.

However, many companies who do a lot of buying and selling used equipment will operate under the "margin scheme" for VAT. This means they can't claim back VAT on goods they purchase, and they only charge VAT on the proportion of the selling price which represents their profit.

I know for a fact that MPB Photographic, who were mentioned earlier, operate under the margin scheme.
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Your VAT registration and MPB's are both the same. If MPB buy a new lens they claim the VAT back the same as you do. If they sold that lens 1 year later as 2nd hand to you they could issue you with a VAT receipt and you could claim the vat back. I presume you do this with your 2nd hand sales?

If you buy a 2nd hand lens from Joe Punter off the street, there is no VAT element in the transaction. If you or MPB then sell that lens at a profit, you will both pay VAT on that profit and no VAT receipt will be issued.

This is the difference between goods that are qualifying and margin.

StewartR said:
It's not as always as simple as this, folks.

Suppose you buy a used lens from me and another from MPB, and you pay £660 each time. I have to charge VAT on the full selling price, so the £660 you pay me is actually £550 + £110 VAT. If you're VAT registered, you can reclaim the £110. However MPB only charge VAT on their profit, so how much that is depends on what they paid for the lens. If they bought it for £600 then the selling price includes £60 profit which is £50 + £10 VAT, so the total selling price is £650 + £10 VAT. If you're VAT registered you can reclaim the £10.
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This is only accurate if MPB bought the lens 2nd hand and you bought it new and I'm pretty sure you can't claim the VAT back on a used lens sold under the margin scheme, I'm quite willing to be proved wrong though.
 
Thanks for the explanation.

I hadn't appreciated that the margin scheme works in parallel to "normal" VAT, but of course it must do, or otherwise retailers who sell both new and used would have difficulty. It's helpful to look at it from the point of view as to whether the goods qualify for the margin scheme, rather than whether the seller qualifies for the margin scheme.
 
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admirable said:
I'm pretty sure you can't claim the VAT back on a used lens sold under the margin scheme, I'm quite willing to be proved wrong though.
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I had assumed you could, but I'm not prepared to insist on it!
 
For those who are interested, HMRC have a very clear explanation of VAT margin schemes - which nicely highlights my former misunderstandings! - here: [[url="http://www.hmrc.gov.uk/vat/start/schemes/margin.htm]click[/url]].
 
A bit more research.....

I was wrong here:
StewartR said:
In either case you should get a VAT receipt showing how much VAT you've paid.
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But this is correct:

admirable said:
I'm pretty sure you can't claim the VAT back on a used lens sold under the margin scheme, I'm quite willing to be proved wrong though.
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My source: [click].
 
Just reading through this thread has certainly helped clear up a few grey areas in my own head.

Thanks to all contributors
 
StewartR said:
That's true, though in the context of this thread I would suggest these are considerations for the retailer rather than the customer.

That's interesting. (I was a bit confused at first though because the last "they" is a bit ambiguous!) Can you remember which dealer that was?
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Mr Cad, when they had a big stand at Focus
 
Just as a side point some of you might find useful, I don't think its been mention. The VAT people also offer a variable rate on the 20% figure. Variable VAT rates are levied on stuff like services as opposed to goods supplied or sold. (this might apply to photography, just pondering here) There are even out/in collection exemptions, for the VAT registered, but only if your business fits they're particular model.

Soz for being vague, I did just try and find something finite about it but my brain stared melting.
 
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