Hi guys,
I'm thinking of becoming a trader and would like to know the legalities of doing so. I'm fishing around eBay and AutoTrader, and only live round the corner from BCA Blackbushe so popped over there to see what's going on. I'm very interested in getting a MyBCA card specifically so I can use online auction view for all BCA auctions!
I've found a few posts regarding tax liabilities for motor traders. An annual gross turnover of over 58k requires VAT registration, setting up own PLC and an accountant.
How does it work for trade plates, trade insurance?
Please any advice would be greatly appreciated! Feel free to email me at chodecz@hotmail.com many thanks!
|
BCA you need to buy, I think 12 or 15 cars from them within a set period then you get at least Gold status and then you get Auctionview, Liveonline etc. Before that you'll have to pay the outragous buyers premiums on your first few cars until you get trade status.
Manheim used to be a bit more flexible - my info might be a few years out of date but they used to give trade status from the off as long as you had trade insurance, plates etc.
Tax law is no different from any other sole trader, partnership or limited company regardless of whether you are buying and selling cars, bathroom fittings or oil rigs.
Edited by pd on 16/11/2009 at 20:19
|
Trade plates are a mobile tax disc to allow you to move a car with no road tax from an auction to your place of sale and obviously for test drives.
You cant use them for nipping to the shops,seeing your girlfriend in brighton or to move a car without a valid mot.
You cant be refused them if you have never been convicted of any kind of revenue fraud but you have to prove you are going to use them for car trading,apply for them via your dvla orrifice (remember to dirty them up before you walk round the auctions with them or some old timers will try to leg you into a lemon seeing as you will be a greeny)
Trade insurance is easily found via google, you can even pay monthly now,when i started i couldnt get trade insurance till i proved i had been trading for 2 years,can you imagine trying to do that on our congested roads these days
Good luck you will need it,its cut throat out there and everyones fighting for the yankee dollar
|
|
|
|
I'm very interested in getting a MyBCA card specifically so I can use online auction view for all BCA auctions!
Auctionview is available to anyone for £15 for 2 months or 100 searches.
An annual gross turnover of over 58k requires VAT registration setting up own PLC and an accountant.
I think VAT registration is about £62K now. You are not required to register as a PLC (where your shares are available to the public on the stock market). In a few years time you may want to become a Ltd. company where you become a seperate entity to your business and by employing yourself you pay less tax. Unless your sales revenue goes into the millions you are not required to have your accounts audited by a chartered accountant and you are at liability to keep your own books/accounts as long as you know exactly what you are doing.
Edited by Wurzel83 on 16/11/2009 at 20:54
|
SQ
Auctionview is available to anyone for £15 for 2 months or 100 searches.
The Auctionview offered to consumers is not the same as that offered to traders. The same applies to Manheims website and watever their consumer version is called.
Edited by Dynamic Dave on 17/11/2009 at 00:33
|
|
|
|
Am I liable for N.I tax, etc??
Is the VAT I pay on the actual sale price of the car or the profit I make??
|
Of course you are liable for NI as you would be in any other business. The band depends on whether you are a sole trader or running as a Ltd company.
VAT works out to about 13% of the gross (not nett) profit per car, i.e. if you buy for 2000 and sell for 3000 you will have a VAT liability of about £130. That applies even if you spent £600 on repairs - making your stand in value £2600 - although can you can reclaim the VAT on money spent out.
|
Thanks for your reply.
'Self employed people are also liable for Class 2 NI contributions (currently £2.40 per week: 2009/10 Tax Year).' What other Class's apply to trader's?
I'm just trying to establish ALL expenditures of being a trader :)
|
It is important not to get caught up that a car trader is something unique. It is no different were you setting up to do a bit of IT support.
Your tax situation depends on whether you have any other income, are also employed elsewhere, are setting yourself up as self employed or via a Ltd company.
Basically, if self employed your main NI costs will be class 4. Reckon on your tax free allowance of £5225 free of tax and NI except for basic Class 2. Anything above that you will pay 20% tax plus 8% NI (so 28% total) up to £34840 income per year. On earnings above that you'll pay 50% tax plus 1% Class 4 NI (51% total).
I am not an accountant so do not take that as gospel. If you budget paying out 30% of anything you make up in tax/NI to about £35k plus about 14% VAT on profits you should be more or less covered.
|
|
|
your first wife walks out
you wake up in the night stabbing the pillow
you get on first name terms with your local boozer landlord
chicken ding becomes your favourite meal after another wasted night at the auctions
all women customers become attainable conquests in your hed
the csa think you are a meal ticket
etc etc
can i just point out non of these are applicable to me but ive seen them all happen
did i mention the suicides?
|
LOL @ Bell Boy :D
Pd - So say I sell cars for a total of £15k each month, which equals a gross turnover of £180K P.A. Say I make 20% gross profit on each car, so my total gross profit P.A will be £36k.
So... what will I be taxed on, turnover or my earnings (profit)??
|
Profit of course. Imagine what BP's tax bill would be if you paid on turnover!
You pay roughly the same tax on a £36k profit as you would in a job earning a salary of £36k except it would be deducted at source if you are on PAYE.
You only pay tax on what you earn whatever you do for a living.
There is nothing unique about trading cars. It is exactly the same as working in a bank, running a shoe shop or being a plumber as far as the tax issues are concerned.
If you make £36k profit after overheads and costs then you would end up paying, very roughly:
About 14% in VAT liability: £5000
Gross profit = £31000
Tax free amount = £6035
Taxed income = £24965
Income tax on income = £4993
Class 4 NI on income = £1997
So, out of the £36000 your take home pay on trading cars would be about £24010 after tax.
These are very back of an envelope figures and I am not an accountant but I reckon they're in the right ball park.
|
Just to add those figures aren't any different to any other job. Take home pay of £2k a month is roughly equal to a salary of £36k in a regular PAYE employment.
If you go Limited rather than self employed then the NI implications are different.
|
|
Many thanks Pd! In your opinion based my example would you think it better to go Limited?
|
I'd stick to sole trader for the time being if starting out. In theory Ltd offers more flexibility in terms of being able to pay dividends etc. but you have employers NI contributions to make.
Obviously you should take proper qualified advice as, as I said above, I am not and do not claim to be an accountant but having run Ltd companies and operated as a sole trader and partnership my advice would be to start out as sole trader status.
|
Ltd will offer you a degree of added protection in case anything goes pear shaped in a big way. Remember that if you have any assets (eg house), they could be at risk in the event of any personal liability.
|
|
Without wishing to pee on the OP's parade, I see nowhere mention of his obligation to punters. It may be that he is already fully aware? If not.....he needs to bone up on consumer regs.
|
I too have run my own business, and in fact still have a ltd company and am VAT registered for the consultancy work I do. I would strongly advise finding yourself a good accountant who can give you appropriate advice as you find your way through the minefield of bureaucracy. I have worked with the same chap for 15 years now and he is wonderful. Just earlier this year I got hit with a penalty for £400 for not making PAYE etc returns within the timescale laid down. As I dont employ anybody I normally chuck all the employers pack stuff in the bin, however my trusty accountant sorted it all for me thank goodness. Believe me, it might cost you something in the first instance but will save you money in the long run. Ask around a few chums who run their own business for recommendations.
MGs
|
|
Don't forget to add all the other expenses you'll incur such as premises rent,electricity etc,insurance(for property and for saleable cars),trade plates,petrol or diesel for test drives.The list goes on.......
|
|
You won't get Trade Plates immediately either.
|
|
|
|
|
