VAT & "Buying Back" Second Hand Goods - Can anyone help ?


A

Ali

Hello there,

This is a question I am finding extremely difficult to get an answer
to....I hope you don't mind me posting it here. I am setting up a
website to sell dvd's. I will be offering my customers half their
money back when they return their watched dvd's within 60 days of
purchase. This will be paid in vouchers which the customer can spend
on my website on a future purchase.

I will then resell these returned dvd's on my website as used.

I am not currently registered for VAT (but intend to) and am fully
aware that I need to consider this when devising my business model.
This seems simple enough for new goods but complex for second hand
products. My question is...

Do VAT rules apply to the returned dvd? Remember, I am not paying
cash for the returns, but giving the customer a credit against future
products. VAT has already been paid on the original purchase of the
title. Should I be including VAT in my calculations when I "purchase"
the dvd back, and likewise do I have to add VAT to the sale of the dvd
as used to the next person ?

Thank you in advance,
Ali.
 
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R

Robert Killington

Hello there,

This is a question I am finding extremely difficult to
get an answer
to....I hope you don't mind me posting it here. I am
setting up a
website to sell dvd's. I will be offering my customers
half their
money back when they return their watched dvd's within 60
days of
purchase. This will be paid in vouchers which the
customer can spend
on my website on a future purchase.

I will then resell these returned dvd's on my website as
used.

I am not currently registered for VAT (but intend to) and
am fully
aware that I need to consider this when devising my
business model. This seems simple enough for new goods
but complex for second hand
products. My question is...

Do VAT rules apply to the returned dvd? Remember, I am
not paying
cash for the returns, but giving the customer a credit
against future
products. VAT has already been paid on the original
purchase of the
title. Should I be including VAT in my calculations when
I "purchase"
the dvd back, and likewise do I have to add VAT to the
sale of the dvd
as used to the next person ?

Thank you in advance,
Ali.
You need to have a look at the secondhand goods scheme. See
VAT Notice 718 for further information. You may be able to
get away with the global accounting side as your "purchases"
will be less than £500 each.

Giving vouchers doesn't entitle you to any input tax
recovery on the purchase of the used DVDs. That's
effectively taken care of in the secondhand goods scheme.
You would have to account for the full VAT on the sale of
new DVDs even when your vouchers are used.

You need to plan for all this very carefully and make sure
you get the VAT accounting correct if you are to avoid
future difficulties with Customs & Excise.

You can get the VAT notice from:

http://www.hmce.gov.uk/forms/notices/718.htm - for the
online version or:

http://www.hmce.gov.uk/forms/graphics/718.pdf - for the
downloadable PDF version.

Best wishes


Robert Killington
visit www.vatark.co.uk
for help with VAT

To e-mail me please do so via my web site.
 

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