VAT margin scheme

VAT margin scheme

VAT margin scheme introduced by HM Revenue and Customs for second hands goods businesses.

You can use the margin scheme if you are selling:

  • Second hands goods
  • Arts
  • Antiques

There are special rules for selling:

  • Used cars
  • Horses and ponies
  • Houseboats and caravans

You cannot use the margin scheme for :

  • precious stones
  • precious metals
  • investment gold
  • item you bought for which you were charged VAT

Calculate VAT under margin scheme

Say, you bought a second hand painting for £20,000 and you sold it for £35,000. Using the margin scheme, you pay VAT at one sixth on the difference (the margin) which is 16.67% thus the VAT amount payable to HMRC is £2,500.

Global Accounting scheme

For high volume and low price items you may use the Global accounting scheme. It is a simplified version of the margin scheme.

Contact HMRC directly if you have any questions about second hands goods VAT scheme.

When not to charge VAT

When not to charge VAT

Company registered for VAT in the United Kingdom must know when to charge and when not to charge Value Added Tax (VAT) to your customers. Generally, you cannot charge VAT on exempt and out of scope products and services.

Out of scope of VAT

Generally, a transaction that is classified as out of scope is excluded from VAT return. This basically mean the transaction is outside the scope of VAT in the United Kingdom. For this transaction, you cannot charge 20% VAT on sales or reclaim any VAT paid to your suppliers.

Examples of transactions classified out of scope of VAT UK are as follows:

  • Where you provide transportation services to a UK and European Unions (EU) customers but the place of the services to be rendered is outside Europe, say in Russia or Malaysia or China or USA.
  • Government statutory fee like London Congestion Charge.
  • Donations to charity.

Zero rated VAT transactions

Selling to customers based in the EU countries are zero rated sales if your customers can provide you with their EU country VAT registration number. In this situation, you put 0% VAT on your sale invoice. This transaction must be included in your VAT return and you must also complete your EC sales List.

You must include your customers’ VAT number on the EC Sales List. Remember to check the EC VAT number for their validity.

Products classified as zero rated in the United Kingdom includes books, newspapers, children’s clothes and shoes and motorcycle helmets. Please do not include these sales in the EC Sales list.

Standard rated VAT

If you are selling to UK customers then you would require to charge VAT on your sales.

An exception is when the services are to be rendered is outside Europe, say a taxi service at Hong Kong airport transfers. This falls under the out of scope category.

Exempt VAT

Some goods and services are exempt from VAT. In other words, no VAT is charged on sales. Examples are insurance, stamps, postage and health care services provided by hospitals.

VAT notice 741/A explains how to determine the place of supply of your services and how to deal with supplies of services which you receive from outside the United Kingdom.

Register of directors’ interest in shares and debentures

Register of directors’ interest in shares and debentures

Register of directors’ interest in shares and debentures must be kept and updated regularly as part of your company’s statutory company registers.

It is a record of the extent to which your directors have invested personal wealth in your company and their dealing in securities. This is a matter which is of obvious interest to other shareholders. Interests of your directors’ spouses and their infant children must be included as well. Shadow directors are to be included too.

The meaning of interest in the context under the UK company law includes:

  • Interest under a trust
  • Interest owned by a company in which the director owns one-third of the voting rights, and
  • Entitlement to exercise any rights in shares.

Both acquisitions and disposals by sale or assignment must be recorded. Your directors’ rights to exercise share options must be included.

Register of directors’ interest in shares and debentures usually is kept your company’s registered office address. If your register is at a different address, your company must give notice to the Registrar of Companies of the place where your register is kept. You must submit the Companies House form AD02 to inform Companies House of your SAIL address.

The register must be available at your Annual General Meeting. It is not mandatory for your company to disclose whom is the ultimate controlling party of your company. However, the personal details of the person with significant control or influence of your company must be registered with Companies House and included in your Confirmation Statement.

Company buy back own shares

Company buy back own shares

Company could buy back your own shares. Your company can finance your purchase or redemption of your own shares out of your capital by passing a special resolution. Your company can only do this provided there is no restriction or prohibition in your company’s articles of association.

Solvency statement

If your company finances your purchase by a payment out of its capital, your company directors must also make a statement about the solvency of your company immediately after the purchase and in the following year. All your company directors must sign the solvency statement.

Directors’ report and auditor’s report

Your company must make a copy of your solvency statement and your auditor’s report confirming your directors’ opinion and made available to your shareholders (members) at or before in the case of a written resolution. If your resolution is to be passed at a meeting, by making a copy of your directors’ statement and your auditor’s report available for inspection at that meeting.

Your company must also deliver a copy of your directors’ statement and your auditors report to Companies House no later than the day on which your company first publish or give notice of your proposed payment out of capital.

You may refer to the section 719 of the Companies Act 2006 for the requirements for publishing and giving notice on this matter.

Apply to court to cancel

Any shareholder of your company who did not consent or vote in favour of your resolution or any creditor of your company, can apply to court to cancel your resolution, within five weeks of the passing of your resolution.

The applicant to the court must complete and the Companies House form SH16 to be delivered to Companies House immediately. When your company receives notice of your court application, your company must immediately notify Companies House using the form SH17 and, within 15 days of the making of a court order, your company must deliver a copy of the order to Companies House.

Refer to Parts 17 and 18 of the Companies Act 2006 for further information on company shares administration required by law.

The changes in your company’s shares capital are to be included when filing your Confirmation Statement.