Dealer mark-ups on trade-ins?

ICBM · May 2020

icu81b4 said:

So What's the VAT position on commission sales? If I sell a guitar privately, I don't have to pay VAT, but if I ask a local guitar shop to have 'my' guitar in his shop window, and my guitar sells, and I then give him 10% - Does that 10% qualify for VAT? - just curious.

Yes it does - on the commission, not the whole value. So the 10% then becomes 8%.

That's why very few shops will offer a commission rate anything like as low as 10% now, at least if they want to make commission sales a profitable part of their business rather than just a way of getting some interesting stock with no outlay.

guitars4you · May 2020

ICBM said:

icu81b4 said:

So What's the VAT position on commission sales? If I sell a guitar privately, I don't have to pay VAT, but if I ask a local guitar shop to have 'my' guitar in his shop window, and my guitar sells, and I then give him 10% - Does that 10% qualify for VAT? - just curious.

Yes it does - on the commission, not the whole value. So the 10% then becomes 8%.

That's why very few shops will offer a commission rate anything like as low as 10% now, at least if they want to make commission sales a profitable part of their business rather than just a way of getting some interesting stock with no outlay.

The same vat 'margin scheme applies to the dealer - I work on 20% as we also have to pay card fees on the whole amount - So a £1000 sale and I'd be pay £10/15 fees to the bank for processing a £1000 card transaction

But on a £1000 sale, I'd pay you £800 and no vat comes into play for you - But from my £200 gross profit then HMRC want £33.34

So my £200 gross profit becomes £200 - £33.34 - £15 -So effectively 25% of my profit is a cost of business

I have heard of other businesses (often in another trade) and/or auction houses were they will charge you 20% + vat on the profit, equates to 24% - So £1000 sale, less 24% and a payout to you of £760 and not £800 - So effectively they charge you the margin scheme vat on the deal and they still retain the 20% profit

Hope that makes sense

icu81b4 · May 2020

@guitars4you Thanks for the breakdown Mark, buying through online auction houses can turn out to be expensive, even after you have paid the commissions, then the courier that you sometimes have to use adds an additional cost that you hadn't accounted for can bring a sour taste to the excitement you had on winning the bids in the first place.

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Dealer mark-ups on trade-ins?

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