Architectural salvage businesses and VAT
Architectural salvage, antiques, accessories and any related services that you are likely to supply are standard rated for VAT. You must register for VAT once your sales have reached the current VAT threshold.
Margin scheme for secondhand goods
Because many items in the architectural salvage industry are bought from - and sold to - private individuals who are not registered for VAT, a special scheme has been put in place. Under this scheme, VAT is due on the difference between what you pay for the goods and what you sell the goods for, instead of on the full value of the goods sold. This difference is referred to as the 'margin' and it includes the VAT due.
For example, if you buy an item for £500 and sell it for £750 the margin is £250. (Figures included here for illustrative purposes only.) To work out the VAT due, multiply the margin by the current VAT fraction. At the moment the fraction is 1/6.
£250 x 1/6 = £41.67 VAT due
To use this scheme you must comply with certain conditions, which are set out in VAT Notice 718, The VAT Margin Scheme and global accounting. This is available from HM Revenue & Customs (HMRC) and online. Other useful leaflets available include VAT Notice 700/1, Should I be registered for VAT?
You can reclaim the VAT you are charged on business expenditure as 'input tax'. However, there's no input tax to reclaim on goods bought for resale under the Margin Scheme.
Every quarter you'll pay HMRC the difference between:
- the output tax due, either on margin scheme sales, or on the full selling price of items if you don't use the margin scheme, and
- the input tax you've paid
Nearly all businesses have to pay their VAT bill electronically - for example by direct debit or online banking. HMRC allows you some time at the end of each quarter before you have to pay the VAT due. So, for example, the VAT due on sales made in the in months one, two and three would be paid at the end of month four. Your VAT return will show your payment deadline date.
Businesses that are having trouble making their VAT payments, or are worried that future payments will cause them problems, can ask for help from the HMRC Business Payment Support Service. If your business needs this financial assistance to tide it over, HMRC will look at your situation and discuss temporary options that could help out. These could include letting you make payments over a longer period and waiving late payment surcharges. To discuss payment problems with HMRC you can call the Business Payment Support Service Helpline on 0300 200 3835.
Making Tax Digital (MTD) for VAT
Under HMRC's Making Tax Digital initiative, VAT-registered businesses with taxable turnover above the VAT threshold must keep records digitally and use special software to submit their VAT returns. You can find out more about MTD on the Gov.uk website.
Further information and guidance on general VAT matters is available from the VAT Helpline on 0300 200 3700.
You may well send items abroad from time to time for overseas buyers. For the purposes of VAT, the term 'export' refers to goods supplied to countries outside the European Union (EU). Special VAT treatment applies to goods exported from the UK - these are usually zero rated. More information is included in VAT Notice 703 VAT: Export of goods from the United Kingdom which is available to download from the Gov.uk website.
The rules for charging VAT on sales made to buyers within the EU depend mainly on whether or not the buyer is VAT registered. If they are then the goods can normally be zero rated so long as all the necessary conditions are met, but if they're not then you'll have to charge VAT if you're VAT registered yourself.