VAT on Buyers fee's

[Mat C 77]

Sorry if this has been asked before.

BCA Buyers Fee's are £xxx + Vat however they don't show the VAT on the invoice ( unless its a VAT Q Car )

I add the Buyers fee to the SIV ( Less the Vat ) when i'm working out my margin - so eg 8k car, £250 + Vat Fee = £8250 SIV Sell for £10k, Vatable margin is £1750.

I asked BCA and they confirmed that the fee's are qualifying however they just don't show on the invoice.

I'm sat with my accountant now and we are slightly confused as to wether was can do it this way.

What do you guys do?

Ta

Mat

[trade vet 704]

You are right,BCA no longer show VAT on buyers fees for margin cars.This is outrageous,1000's of traders will not be accounting for VAT and will be out of pocket! HMRC must have directed BCA on this one,they are the ones who will benefit.How is it,when you have a VAT visit,the inspector never volunteers any mistakes in your favour or things like allowances for business use of your personal mobile phone etc .I have had them try and charge VAT on road tax and on finance balances on negative equity deals.Anyone else had similar experiences.

 

[Tony F 38]

Hi.

buyers fees form part of the vehicle purchase price as the vehicle cannot be purchased from auction without paying the fee.  You then calculate the vat on the margin using the buyers fee as part of the vehicles  Siv  

otherwise, theoretically, if you bought a car for £5000 plus £300 fee and sold it for £5300 you would show a £300 gross in the stock book which incurs vat  thereby making a loss on what should be a money back deal.

I had this in writing from the vat office a few years ago.

hope it helps

If anyone else is reading this and you have not been using the auction fees as part of the cars purchase price then it's possible you have been overpaying your vat on each deal.

it can add up to thousands of pounds extra overpayment per year

[justlooking 48]

sorry to resurrect an old post but what do we do in relation to 'non vat applicable' add ons such as BCA assured which I'm paying £33 for.

Is it legit to add this to the purchase price of £5000 as per tonys example?

therefore;

£5000 + £300 fee + £33 = allowing a stock book purchase price of £5333 or should it remain £5300.

[Nick M.K. 574]

So under the margin scheme:

You buy a car for £10000 hammer

Buyers fee (Gold) is £302 

BCA assured charge £33

You total purchase price is then £10335 and this is what you put in your stock book as purchase price. Because this is taken into account when you work out your margin you don't lose out on the VAT. As Tony F pointed out the fees effectively reduce your margin. Where you WILL lose out is if you don't make a profit on that sale because there is no VAT due to offset against. 

If the invoices (BCA storage a good example) have VAT separately displayed you just reclaim the VAT on the invoice and don't include it in your "stockbook" purchase price. 

From the Gov.uk Margin Scheme for Second Hand cars. It gets EXTREMELY confusing when you read section 8.4. Basically they are saying that Buyers Premium and Indemnity fee are two different things although I loosely use the same wording for the same buyers fee at BCA :-)

8.3 Work out the purchase price of eligible vehicles bought at auction

Your purchase price will be the hammer price of the vehicle plus charges for services.

The invoice you get from the auctioneer will itemise, for each lot you have bought, the hammer price of the goods and any charges for services (for example, buyer’s premium). These charges must not show VAT separately.

This will be your purchase price for the purposes of the margin scheme or global accounting, and is the amount that you must show in your stock book. It should be clearly identified on the invoice you get from the auctioneer.

If the auctioneer bills you for any other services, and charges VAT on them separately, you can reclaim the VAT under the normal rules. You must not add those charges to your own margin scheme purchase price. To avoid confusion, you may want to ask the auctioneer to provide you with a separate invoice for such charges.

If you are in any doubt about what your margin scheme purchase price should be for a vehicle you have bought at auction, you should check with the auctioneer.

8.4 Indemnity fees

When you buy a vehicle at auction, you will usually be charged an indemnity fee. This is a charge which ensures that you will have compensation or indemnity if the vehicle you have bought is later found to have been stolen or to have finance outstanding on it.

You must not include the indemnity fee in your purchase price for margin scheme purposes.

Edited July 16, 2018 by Nick M.K.

[david gott 58]

7 minutes ago, Nick M.K. said:

So under the margin scheme:

You buy a car for £10000 hammer

Buyers fee (Gold) is £302 

BCA assured charge £33

You total purchase price is then £10335 and this is what you put in your stock book as purchase price. Because this is taken into account when you work out your margin you don't lose out on the VAT. As Tony F pointed out the fees effectively reduce your margin. Where you WILL lose out is if you don't make a profit on that sale because there is no VAT due to offset against. 

If the invoices (BCA storage a good example) have VAT separately displayed you just reclaim the VAT on the invoice and don't include it in your "stockbook" purchase price. 

I remember a few years ago when manheim stopped adding the vat on their invoices, I posted something on the Autotrader forum and David Horgan showed me this way of doing it, I didn't realise though if you don't make a profit to do it the other way

[Nick M.K. 574]

If you get a £300 fee which is VAT inclusive and you don't get an invoice for it the only way to recover that VAT is when you pay less VAT on your profit margin. When you didn't make a profit that opportunity is lost. 

8 minutes ago, david gott said:

I didn't realise though if you don't make a profit to do it the other way

I should've made it more clear that you don't have a choice David, because BCA don't issue a VAT invoice for the fees even if you wanted one.

[david gott 58]

So buy a car for £10000, indemnity fee £300, stock book purchase price £10300.

Sell the car for £10300, then claim back the £60 vat???

 

[Nick M.K. 574]

Not exactly. And let's call it a Buyers fee, not Indemnity fee (see 8.4 in my post above):

No Buyers fee: Buy for £10000, sell for £12000, pay VAT on £2000 margin. 

With Buyers fee: Buy for £10000, add £300 buyers fee, sell for £12000, pay VAT on £1700 margin. The lower margin to pay VAT on gives you your saving. 

[david gott 58]

So basically you can't claim any vat back on a buyers fee you can only minimise the vat margin you pay?

[Nick M.K. 574]

4 minutes ago, david gott said:

So basically you can't claim any vat back on a buyers fee you can only minimise the vat margin you pay?

Under the Margin scheme, Yes. 

[justlooking 48]

5 hours ago, Nick M.K. said:

So under the margin scheme:

You buy a car for £10000 hammer

Buyers fee (Gold) is £302 

BCA assured charge £33

You total purchase price is then £10335 and this is what you put in your stock book as purchase price. Because this is taken into account when you work out your margin you don't lose out on the VAT. As Tony F pointed out the fees effectively reduce your margin. Where you WILL lose out is if you don't make a profit on that sale because there is no VAT due to offset against. 

If the invoices (BCA storage a good example) have VAT separately displayed you just reclaim the VAT on the invoice and don't include it in your "stockbook" purchase price. 

From the Gov.uk Margin Scheme for Second Hand cars. It gets EXTREMELY confusing when you read section 8.4. Basically they are saying that Buyers Premium and Indemnity fee are two different things although I loosely use the same wording for the same buyers fee at BCA :-)

8.3 Work out the purchase price of eligible vehicles bought at auction

Your purchase price will be the hammer price of the vehicle plus charges for services.

The invoice you get from the auctioneer will itemise, for each lot you have bought, the hammer price of the goods and any charges for services (for example, buyer’s premium). These charges must not show VAT separately.

This will be your purchase price for the purposes of the margin scheme or global accounting, and is the amount that you must show in your stock book. It should be clearly identified on the invoice you get from the auctioneer.

If the auctioneer bills you for any other services, and charges VAT on them separately, you can reclaim the VAT under the normal rules. You must not add those charges to your own margin scheme purchase price. To avoid confusion, you may want to ask the auctioneer to provide you with a separate invoice for such charges.

If you are in any doubt about what your margin scheme purchase price should be for a vehicle you have bought at auction, you should check with the auctioneer.

8.4 Indemnity fees

When you buy a vehicle at auction, you will usually be charged an indemnity fee. This is a charge which ensures that you will have compensation or indemnity if the vehicle you have bought is later found to have been stolen or to have finance outstanding on it.

You must not include the indemnity fee in your purchase price for margin scheme purposes.

Thanks Nick, makes perfect sense to me. Very useful.

I’m not sure anyone charges an indemnity fee so their 8.4 is all but irrelevant.

[Arfur Dealy 823]

The buyers premium plus the hammer price is your stockbook net cost of the car..... Surecheck & delivery are expences which we pay VAT on........ That's how Ive been doing it for years

[justlooking 48]

6 hours ago, Arfur Dealy said:

The buyers premium plus the hammer price is your stockbook net cost of the car..... Surecheck & delivery are expences which we pay VAT on........ That's how Ive been doing it for years

Yes I think that’s spot on for Manheim as I think they charge VAT for both surecheck and live online, however some of the auction houses list the live online fee without VAT, therefore allowing us to account for the live online fee as part of the buyers premium in the stock book.

8.3 Work out the purchase price of eligible vehicles bought at auction

Your purchase price will be the hammer price of the vehicle plus charges for services.

The invoice you get from the auctioneer will itemise, for each lot you have bought, the hammer price of the goods and any charges for services (for example, buyer’s premium). These charges must not show VAT separately.

Edited July 16, 2018 by justlooking

[Scooby who 41]

I asked this of my accountant recently when doing returns and my understanding is that we can offset vat for goods purchased but not also a service

 

BCA Assured is a service so therefore itemised separatly and the vat not something we can claim back

 

Correct me if I'm wrong but that is my understanding of it

Edited July 17, 2018 by Scooby who

[Raymond 0]

On 7/16/2018 at 5:47 PM, Arfur Dealy said:

The buyers premium plus the hammer price is your stockbook net cost of the car..... Surecheck & delivery are expences which we pay VAT on........ That's how Ive been doing it for years

Sorry to dig this thread again.

About Surecheck &delivery

I also buy from Mahneim

My accountant has been calculating my margin by Total invoice payable-sales price.  i.e the payable to Manhein includes (surecheck+delivery+vat) which obviously bring down the margin about (25+40+vat13= £78) so I have been underpaying VAT?

Do I need to move the surecheck+delivery to expenses and claim VAT as normal, and readjust the margins?

Worried now...

can't upload the image check the link please. 

This the last invoice from manhie.

In the last column you see the balance is £1667.60 that I sold for £2000. it show in margin scheme register as purchase price 1667.6- 2000 sale=332.4/6=55.40 where it should have 1589.6-2000=410.4/6=68.40 then claim the expense as 25+40+13=78. So the overall vat payable is still the same but entries are in wrong place?    

http://i.is.cc/storage/2IJa5jSn.jpg

 

[Mark101 536]

1 hour ago, Raymond said:

Sorry to dig this thread again.

About Surecheck &delivery

I also buy from Mahneim

My accountant has been calculating my margin by Total invoice payable-sales price.  i.e the payable to Manhein includes (surecheck+delivery+vat) which obviously bring down the margin about (25+40+vat13= £78) so I have been underpaying VAT?

Do I need to move the surecheck+delivery to expenses and claim VAT as normal, and readjust the margins?

Worried now...

can't upload the image check the link please. 

This the last invoice from manhie.

In the last column you see the balance is £1667.60 that I sold for £2000. it show in margin scheme register as purchase price 1667.6- 2000 sale=332.4/6=55.40 where it should have 1589.6-2000=410.4/6=68.40 then claim the expense as 25+40+13=78. So the overall vat payable is still the same but entries are in wrong place?    

http://i.is.cc/storage/2IJa5jSn.jpg

 

You have been underpaying:

Purchase price is hammer + buyers fee (if there is no VAT showing separately).

Selling price is whatever you sell it for.

Costs are recon + online fee + Surecheck + whatever else.

[Raymond 0]

Thanks @Mark101

oh I can upleade images now.

Could you please check this invoice  specially the last column as in the example above.. 

Can I claim the £13 VAT on Charges (25 Surecheck40 +delivery)?If yes then it is kind of counteract  the £13 underpayment?? Am I right? So it just a an accounting error?

[Arfur Dealy 823]

4 hours ago, Raymond said:

Thanks @Mark101

oh I can upleade images now.

Could you please check this invoice  specially the last column as in the example above.. 

Can I claim the £13 VAT on Charges (25 Surecheck40 +delivery)?If yes then it is kind of counteract  the £13 underpayment?? Am I right? So it just a an accounting error?

Your stock book price is the hammer price plus the auction buyers premium cost combined..... every addition cost is VATable and redeemable.

[Raymond 0]

Thank guys I will be talking to my accountant. Looks to accounting error but I would like to if the vat on expenses are claimed or still stuck with stock not sold yet.

 

 

[David Horgan 564]

1 hour ago, Raymond said:

Looks to accounting error but I would like to if the vat on expenses are claimed or still stuck with stock not sold yet.

I don't understand that question ?

[Mark101 536]

23 hours ago, Raymond said:

Thanks @Mark101

oh I can upleade images now.

Could you please check this invoice  specially the last column as in the example above.. 

Can I claim the £13 VAT on Charges (25 Surecheck40 +delivery)?If yes then it is kind of counteract  the £13 underpayment?? Am I right? So it just a an accounting error?

Your purchase price (last column) is £1589.60.

So presume you sell for £2,500 - you will owe the VAT at (£2500 - 1589.60) X (1/6) = £151.73

But you can reclaim £13 from the VAT on everything under (S) plus any other recon.

Hope that helps.

[Raymond 0]

3 hours ago, David Horgan said:

I don't understand that question ?

I mean as long the car bought is not sold I am losing on claiming the VAT in the quarter it happened.

So it is wrongly included in the purchase price by the accountant. The total VAT of £23 should be claimed as normal as soon as possible on next VAT return. and pay whatever VAT is due on margin when the car is sold.. 

[Curiousgeorge 0]

Does this rule also apply to vat qualifying vehicles bought at auction?.....vat inclusive buyer‘s fees are to be added to the hammer price of the vehicle to increase the purchase price of the vehicle which narrows the sales margin?