OcUK Car Traders - help!

[[TW]Fox]

This spec BMWs are frequenting Manheim auctions at the min as they host a sale for cars provided by BMW UK (Trade only sales) and they just about make CAP average, rarely over clean.

Thats interesting - reckon there will be a glut of them on the market soon then? There isn't a huge amount of them around and the ones they are around seem to hang around for ages - there are cars which have been for sale for months.

I wonder if some of the cars in the BMW UK sales are the AUC's I've seen on the site for months which then dissapear, presumably unsold..

 

[Kingy]

It's an expression, 20% of the net profit from the sale of the vehicle is paid to HMRC under the VAT margin scheme.

On second hand goods? I'd understand handing over 20% Corporation Tax on the overall Gross Profit of the company, but why would VAT be applied to the profit of a second hand car?

http://www.hmrc.gov.uk/vat/index.htm

Cheers for that...

 

[[TW]Fox]

On second hand goods? I'd understand handing over 20% Corporation Tax on the overall Gross Profit of the company, but why would VAT be applied to the profit of a second hand car?

Because it.. just is. He's totally right - if a trader is using the VAT margin scheme, they pay VAT on the profit.

 

[Maz]

On second hand goods? I'd understand handing over 20% Corporation Tax on the overall Gross Profit of the company, but why would VAT be applied to the profit of a second hand car?



Cheers for that...

Because that's the law smart arse!

I doubt AUC are going through auctions, just eventually being sold!

Some of these cars can go through a 4 figure preperation, so after that being done the last thing you want is to lose a chunk at the block!

Most of the cars put through by BMW UK seem to be ex lease cars, and some demo cars etc.

Some M cars aswell all doing less than book.

The auction is trade only though, so unless you have a trade account they refuse you entry.

 

[Kingy]

Because that's the law smart arse!

I doubt AUC are going through auctions, just eventually being sold!

Some of these cars can go through a 4 figure preperation, so after that being done the last thing you want is to lose a chunk at the block!

Most of the cars put through by BMW UK seem to be ex lease cars, and some demo cars etc.

Some M cars aswell all doing less than book.

The auction is trade only though, so unless you have a trade account they refuse you entry.

Smart arse? Seriously, WTF???

I've never heard of the VAT margin scheme. I'm not saying it doesn't exist, just that I was suprised to see profits on used items going to the VAT man. Am I really the only one who thought that to be unusual?

FFS, I wasn't sure if when you said VAT man, you actually meant tax man (given the %ages are the same these days), or if there was something similar to the flat-rate-VAT scheme I'm on that I'm unaware/ignorant of, so I queried it.

I realise that *some* people here look to score cheap one-upsmanship points, but read it again, did my post honestly come across that way?

If it did, I'll apologise after I've had a kip...

In the interests of recovering a pleasant exchange, how does this VAT margin scheme work in practice/plain English?

/me thanks Fox in advance for a Pro-Tip on Googling VAT margin scheme, I'll do that when I wake up...

 

[[TW]Fox]

I've never heard of the VAT margin scheme.

Presumably because you don't trade cars/have no interest in trading cars. It's car industry specific.

 

[Kingy]

Presumably because you don't trade cars/have no interest in trading cars. It's car industry specific.

*sigh*

Thanks Fox...

 

[J1nxy]

Short answer you pay VAT on the difference between the purchase price and the resale price...

And it's not specific to the motor trade

 

[[TW]Fox]

Ok not 100% specific but 95% of people using it are vehicle dealers I'd imagine. It is where it is overwhelmingly most common.

 

[Kingy]

Short answer you pay VAT on the difference between the purchase price and the resale price...

And it's not specific to the motor trade

Ta,

So presumably VAT is another expense (as you're not charging it as well), and then you have corporation tax on the GP as well?

 

[J1nxy]

Ok not 100% specific but 95% of people using it are vehicle dealers I'd imagine. It is where it is overwhelmingly most common.

and the game/cd/dvd resale companies and other people as well...

 

[[TW]Fox]

and the game/cd/dvd resale companies and other people as well...

So like I said then, most of it is vehicle traders

 

[Kingy]

So like I said then, most of it is vehicle traders

Without wishing to challenge anyone's alpha status, any chance of filling in the blanks for those without a clue?

Joe Car Trader buy a car for £10k, spends a grand on MOT/Servicing/Repairs/Warranty, and sell it for £13k. He pays 20% VAT (despite having not charged it) on the (presumably net margin?) of £2k.

Rinse/repeat (say 50) times, deduct other business costs (premises/insurance/salary etc, then pay ANOTHER 20% to HMRC in Corporation Tax?

So every for pound in profit on a used car, 36p works it's way back to Osborne? (even & that's assuming zero expenses other oing doing up the car)

It's not often I feel for used car dealers...

 

[[TW]Fox]

Yes, in the same way that if Mr Shopkeeper sells an item for £100, he pays 20% VAT on that. Then corporation tax on the profits.

 

[Kingy]

Yes, in the same way that if Mr Shopkeeper sells an item for £100, he pays 20% VAT on that. Then corporation tax on the profits.

But Mr Shopkeeper will claim back the VAT on the purchase price? (Assuming Mr Shopkeeper deals in new goods?)

 

[[TW]Fox]

But Mr Car Trader doesnt pay any VAT on his purchase price...

Mr Service Provider charges VAT as well, and he has no purchase price.

 

[Kingy]

But Mr Car Trader doesnt pay any VAT on his purchase price...

Mr Service Provider charges VAT as well, and he has no purchase price.

But Mr Service Provider charges VAT on top of his service(labour) charge, in addition to charging VAT on the (new) parts supplied. MSP will have to claim back the VAT he paid when he bought the parts from his supplier.

EDIT: Ok, I normally get this sort of stuff, and it still makes sense in my head, but your given unwavering approach and clean-living lifestyle, I'm going to play my "I-hadn't-really-sobered-up-from-the-champions-league-final-and-the-monaco-gp-hasn't-helped-that" get out of jail free card and concede ungracefully until someone can apply the numbers to the theory and bail me out (read: condemn me)...

 

[J1nxy]

Its the same principle they charge VAT on the product they sold but reclaim VAT on the goods they purchased. A Service Provider doesn't reclaim VAT as they haven't been charged it but they charge VAT at the prevailing rate...

 

[Maz]

I get the VAT back on any money I've spent on prep - well it comes of the VAT due from profits from the sale.