HMRC VAT - Second Hand Margin Scheme

[second_sound]

Hi,

I believe I will be writing for many other sellers concerns here.

I have recently become a business (hooray!) However, with that comes the responsibility of inevitably paying VAT once you approach £85,000 in sales. My question is, given HMRC's rules for purchase and sold invoices, how can one be applicable to use the HMRC Second Hand Margin Scheme when purchasing and selling through eBay?

For context, the reason why myself and other eBay business sellers would want to use the second hand margin scheme is because it allows businesses to claim 16.67% VAT on their profits and not 20% of the overall sale. This means if a VAT registered business buys an item for £800 and sells it for £1,000, then they will have to pay £33.34 as opposed to £200 in VAT. A big difference.

To enable businesses to use this scheme, the business must have purchase and sold invoices. HMRC state the criteria for such invoices on this hyperlink: https://www.gov.uk/vat-margin-schemes/keeping-records

What I see from eBay's purchase and sales invoices thus far is that they fall short of these criteria:

Purchase:

Seller's Name and Address

Sold:

The business' VAT Number

Has anyone had experience using this second hand margin scheme when buying and selling through eBay? Do HMRC give leeway on eBay's invoices? As HMRC has access to eBay's databases, can they confirm the legitimacy of the sales and purchases and thus, allow the business to pay VAT through the second hand margin scheme?

I've tried HMRC and eBay's contact centres, been passed around teams, and all I can get are best guesses. I've been told to ask for the name address from whom I've previously bought items from, but that obviously does not have a 100% success rate. All experiences/knowledge on this subject would be appreciated!

Many thanks,

Mike

[*vyolla*]

Seriously, ask a good accountant who specialises in online selling.

eBay Customer Services will not be able to advise on this, and it's a bit dangerous because people can impart incorrect info in a confident manner.

I'd 100% stick with professional advice here.

[wyattharrisx]

I cant give advise on your VAT question but Ive never had to provide an eBay invoice to the VAT man ( even when I was registered that is ) though I retained all invoices in case I ever needed to produce them

From the link you posted it just seems to indicate you must obtain an nvoices from purcahses and provide invoices from sales and store and keep a record for 6 years. Seems standard to me

[4_bathrooms]

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@second_sound wrote:

To enable businesses to use this scheme, the business must have purchase and sold invoices. HMRC state the criteria for such invoices on this hyperlink: https://www.gov.uk/vat-margin-schemes/keeping-records

What I see from eBay's purchase and sales invoices thus far is that they fall short of these criteria:

Purchase:

Seller's Name and Address

Sold:

The business' VAT Number

---

I will firstly echo the previous advice; you really need to speak to a qualified accountant if you need help with your VAT obligations.

Anyway, most of the information you are asking for is given in the HMRC link you posted. You need the seller's name and address which you will have in the eBay sales record (if you purchased the item via eBay); you will need to print this off to show how much you paid and who you purchased from. When you sell the item you (not eBay) are responsible for generating an invoice. You can't rely on the "Print invoices and more" option eBay provides as it generates an invoice with a VAT breakdown if you're VAT registered - you're not allowed to provide a VAT breakdown to the buyer using the margin scheme. Also, it does not produce a valid VAT invoice at all if the buyer collects in person. 

Also note you can't use the margin scheme if you were charged VAT when purchasing the item. If you purchase an item from a business and they supply a VAT invoice for the purchase you can't sell it under the margin scheme unless they supplied a margin scheme invoice (marked as such) with no VAT breakdown.

[second_sound]

Thanks for the responses all!

I've had a few discussions with my accountant around this and we've both been figuring this out over the past few days. My accountant is going to ask around their community to see if they can find anyone who's had experience claiming on the second hand margin scheme. Thus, getting that professional advice. 

I'm hoping to see if anyone has been successful on eBay using it? So I can see practically that it has worked for others and how. For me, the reason for HMRC needing a name, address and all the etcs. Is to verify the legitimacy of a transaction and to confirm that the person is not registered for VAT. However, given eBay and HMRC's relationship, I'm hoping if asked to provide invoices, what eBay has on the front end, and supplemented by the back end, would prove sufficient. Nonetheless, to avoid speculation, I'm hoping to see if anyone has had experience successfully claiming on the second hand margin scheme.

If anyone has experience in claiming on this scheme then please add to the feed!

[papso22]

Ebay does not have a special relationship with HMRC, they are a taxpayer like any other.  They do not have access to ebay's databases.

Unless published as a concession for online marker places the second hand margin scheme rules apply to ebay sellers in exactly the same way they apply to any other seller.