Vat level and costs for Car trader ???

Honest John Back Room » Motoring discussion
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Tue 20 Jun 2006 16:52
Vat level and costs for Car trader ??? - mikepenn
Hi, i have recently set up as a part time motor trader and i am doing ok out of it.
To keep under the vat level i tend to stick to cheap cars under 1000 and tend to sell about 6 a month.
Gross turn over is roughly about 50k to 60k.
So i only pay tax on the net profit left after insurance, general tidy up jobs, adverts etc....
I am happy to stay at this level but would ideally move on to more expensive cars, but in turn this would push my gross turn over, over the vat limit.
My main question is would i have to pay 17.5% vat on my net profit?
its just that if this is the case i might as well as stick to the 'cheapies'
I already pay 22%(tax) on net profit at the moment so a futher 17.5%(vat) would make it not worth my while.
On making 800 from one expensive car i would end up with only roughly 480 net profit.
If any traders out there have any loop holes or if the level is different on cars, could you let me know as dealing with cheaper cars is annoying when i could be making so much more money out of the higher end of the car trade.
Thank you for any advise on this matter ,
regards ,Mike
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Tue 20 Jun 2006 17:20
Vat level and costs for Car trader ??? - Peter D
I think you had better take some professional advice here at the Vat threshold is 61K per annum. Used cars attract Marginal Vat. Visit www.dragon2000.co.uk/support/Q10003.htm Regards Peter
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Tue 20 Jun 2006 17:22
Vat level and costs for Car trader ??? - mare
You don't pay VAT on your profit, you (and everyone else) pays it on goods and services you buy. I don't know the rules on second hand cars, so i don't know whether you would charge VAT.

If you register for VAT, you can claim back VAT on expenses. Which is handy.

Take a look on HMRC website. I've found the VAT guides and helplines easy to use and contrary to what you'll hear, they are human and would rather help you get it right in the first place then come chasing after you.

Hopefully an actual trader will be able to fill you in better.
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Tue 20 Jun 2006 17:29
Vat level and costs for Car trader ??? - Falkirk Bairn
I believe the VAT is charged on the difference between your BP & SP not on the SP itself.

SP = £1000
BP = £600

Profit inc VAT = £400
Profit = £340 approx VAT = £60 approx

i.e VAT approx is 15% of the Profit Margin
Dividing by 1.175 is very near multiplying profit by 0.85 Hence the 15%

Years ago on the continent the rules are different and by levying VAT on the SP the 2nd hand trade in Germany took a hammering. I do not know what their rules are now.
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