VAT on Commission

[CRW 73]

Right, so a few weeks back I received an email from A4C saying they wouldn't be showing VAT on the commission charges. I imagine quite a few of you got it as well.  So is this a new accounting practise where there is no VAT on commission or is there still commission to be reclaimed? If its the first one, then they haven't dropped their commission prices and thus have just in effect increased their prices by 20%. Nice!

Have just bought a £5k+ car from them and the invoice shows a £72 buyer fee and VAT as £0.

I will ask them to clarify tomorrow when I collect.

[David Horgan 564]

Means the 5k car you bought is effectively £5,072 now so the margin VAT scheme takes care of it . You don't pay margin VAT on the £72 

BCA do it as well . 

Edited September 5, 2019 by David Horgan

[CRW 73]

1 hour ago, David Horgan said:

Means the 5k car you bought is effectively £5,072 now so the margin VAT scheme takes care of it . You don't pay margin VAT on the £72 

Yes, true, I can see what your saying. Should probably have worked that out with my years as an accountant!

So you say the price of the car is the total paid including commission and then calculate your VAT on the margin between that and sales price?  Can just imagine HMRC querying that!

Surely with the MTD that is in play now this will be an easy mistake to make.  When using your accounting software, you enter your purchase price of £5072, then previously you would have transferred the £72 to your commissions account by journal entry. Therefore, your back to the original £5000 purchase price, theres no VAT on the £72 in commissions and good old HMRC have an extra £12 out of you on the margin scheme?  Or am I just overthinking it now?!

 

Edited September 5, 2019 by CRW

[Mark101 536]

If there is no VAT showing (usually on margin stock), add the £72 quid to your purchase price. It is then excluded from your gross margin where VAT margin is calculated.

Usually Vat Q cars; If your fees are plus VAT, you cannot add these to your purchase price because you will be reclaiming the VAT.

[David Horgan 564]

Old scheme 

You bought car for 5k and sold it for 6 k , margin vat on £1000 

New scheme 

You bought the car now for £5,072 and sold it for 6 k margin vat now is on £928 and not the 1,000 

So instead of paying the vat and claiming it back , you dont pay it , but you pay less vat on less gross profit 

 

[Mark101 536]

6 minutes ago, David Horgan said:

Old scheme 

You bought car for 5k and sold it for 6 k , margin vat on £1000 

New scheme 

You bought the car now for £5,072 and sold it for 6 k margin vat now is on £928 and not the 1,000 

So instead of paying the vat and claiming it back , you dont pay it , but you pay less vat on less gross profit 

 

We both know how it works, clearly. The amount of people who I have tried to explain it to is incredible (not OP, I don't mean that). 

People who think I draw £2k out of everything and must be having it off. Then I explain how even on cars I have lost money on, I still have to pay the VAT margin because I still sold it for more than the hammer price (but lost on heavy recon).