VAT Charged by Auction / Non-VAT-Registered Trader

[Sue2003]

I recently placed some business stock in auction; IÂ’m *not* VAT registered.

HAMMER PRICE OF GOODS SOLD: £130.00
+ VAT ON GOODS: £ 22.75
Therefore, total of £152.75 charged to purchasers

**COMMISSION & AUCTIONEER EXPENSES**: £45.54 inc VAT
STATEMENT TOTAL: £84.46 (final amount paid out to me)


I was talking with the person at the auction and they told me they are legally obliged to charge VAT on top of the hammer price of the goods. Hence the hammer price of £130 + £22.75 VAT on top of hammer price.

I was told they do this as they only deal with traders, and all goods they sell at the auction are *new* goods and so they have to charge VAT on top of the sale price irrespective of whether the trader is VAT registered or not.

I was told if the trader was VAT registered then this VAT is sent to the trader so they can then remit the necessary amount the customs & excise. Though this VAT is *not* sent to a trader who is not VAT registered. I'm assuming they remit this VAT themselves onto Customs & Excise.

Though I pointed out that if a trader who is *not* VAT registered sells goods to a retail customer then the trader does not charge VAT to the customer, so why would they be required to charge VAT to the purchasers in this instance (I'm not VAT registered). But they seemed to indicate that being an auction this made things different than to a regular retail sale.

Does this make any sense, as it doesn't really make much sense to me...

[paultaylor@vatease.c]

ST,

An auction house (and indeed any agent) who invoices in their own name MUST act as a principle in the transaction (as though he were selling his own goods).

They are therefore required to either

1) Account for VAT on the full amount, or
2) Operate "The Auctioneers' Scheme" (similar to the normal Second Hand Scheme but with adjustments for charges made to the buyer and seller).

It would appear that your auctioneer is using the first option. He must account for VAT on the full price. He will then deduct the auction fees to give the net amount payable to you.

If you had been VAT registered, he would have added VAT onto the net price before paying you as he could recover it on his VAT return.

Hope this makes it a little clearer.

Paul Taylor
http://www.vatease.co.uk/

[Sue2003]

Thanks very much for this, this clarifies things a bit - I had wondered why they had charged VAT to the purchaser(s).

You mentioned "The Auctioneers' Scheme" and the "Second Hand Scheme", out of curiosity can either of these schemes be operated by the auction for the sale of *new* goods from a non-VAT-registered trader?

Or is the VAT-registered auction obliged to charge VAT on all *new* goods, even if from a non-VAT-registered trader?

[paultaylor@vatease.c]

The way "second hand goods" are defined in the scheme would include anything bought from an unregistered business (except certain goods excluded from the scheme). This makes them eligible for the Auctioneers' Scheme and the Second Hand Scheme.

However, both of these schemes are optional and dealers are not required to operate them.

Regards

Paul Taylor
http://www.vatease.co.uk/

[Sue2003]

Thanks very much again Paul.

So, I guess when I'm recording this in my accounts I would record that I sold goods for a total of £130, and I paid a total of £45.54 in auctioneers charges.

I guess I would *not* record that I sold goods for £152.75 (i.e. £130 + VAT); as I'm not VAT registered

[paultaylor@vatease.c]

That is correct. Your income was £130.

Paul.

[Sue2003]

Thanks very much again for this Paul; - much appreciated.