When Is A Horse Like A Second Hand Car
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Published originally 27 January 2015
There is an
opportunity for horse dealers and “pinhookers” to benefit from this
help the profitability of struggling equine businesses. It is essential
equine businesses to confirm the VAT position. The recent case of Alexander
Spencer-Churchill (TC3763) has
highlighted the need to consider single transactions in the context of
business registration. The treatment of liveries and horse sales can be
complex and misunderstood.
selling horses under
the Second Hand Goods Margin Scheme
Hand Goods Margin Scheme is an optional VAT scheme which can be used in
circumstances to benefit the business. This Scheme is most beneficial
situation where the trader purchases goods from businesses or
are not registered for VAT, and therefore is unable to reclaim input
VAT on the
purchase. Normally this would mean that when the business comes to sell
item, they would be liable for output VAT on the full sale price. This
businesses at a certain disadvantage if they regularly deal with this
customer. The terms of using the Scheme are quite strict, however the
principles are as follows:
Scheme allows a lower rate of input or output? What is the lower rate?
be paid over, when the seller which you purchased the item from is not
registered for VAT, ie an individual.
goods must be second hand when purchased, and cannot be, in the case of
and ponies, animals that have been bred by yourself.
detailed stock book must be maintained to ensure that the purchase
price of the
stock is easily able to be identified, and therefore the margin on the
able to be calculated.
Scheme can be used in conjunction with sales which do not qualify under
Scheme (ie sales not of second hand goods or those which input VAT is
detailed record keeping
One of the
main conditions of using the Scheme, is that very detailed record
relation to the purchase of the stock must be maintained. This is to
that there are no abuses of the system. The stock book should contain
number in numerical sequence
of the product purchased – in terms of a horse or pony, this would need
include the details such as:
identifying passport number
name (if known)
specific forms which can be obtained from the British Equestrian
Association (BETA), as an alternative to keeping detailed records such
that are required to be disclosed on the sales invoice will be slightly
different from that of normal sales invoices that are normally raised,
will fall within the Margin Scheme rules. The sales invoice should
disclose the following additional items:
method to cross reference the sales invoice to the stock book.
output VAT on the sale MUST NOT
be shown separately on the invoice, although output VAT will need to be
over on this sale. Output VAT will need to be paid over on this sale
but MUST NOT be
shown separately on
the invoice and therefore included within the total price?
description “Margin Scheme – Second hand goods” must be disclosed on
The fact is
that the sports horse industry has such a large mix of business and
players, ie VAT registered and non-VAT registered interactions, this
be very useful to minimise the VAT disadvantage.
tax tribunal cases of disputing the commerciality of equine businesses,
Thorne and Murray,
have highlighted the need for equine operations to consider
evidence of commerciality. This scheme can be used to improve the
the operation including VAT registration and optimising VAT
in turn can help with commerciality and profitability.
About the Author
Supplied by Julie Butler F.C.A.
Butler & Co, Bennett House, The
Dean, Alresford, Hampshire, SO24 9BH.
01962 735544. Email;
firstname.lastname@example.org, Website; www.butler-co.co.uk
F.C.A. is the author of Tax Planning for Farm and Land
Professional), Equine Tax Planning
ISBN: 0406966540, and Stanley: Taxation
of Farmers and Landowners (LexisNexis).
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Article Published/Sorted/Amended on Scopulus 2015-03-13 09:00:43 in Tax Articles