Tax for Second Hand Goods - VAT Margin Scheme

kickgame
Excursionist
22 0 8

I sell some products that are eligible for the VAT Margin Scheme (you can read about that here - https://www.gov.uk/vat-margin-schemes)

 

With these, tax is not calculated on the selling price, but on the profit of the product.

 

So for example, If I bought something at £100 and sold at £220, profit would be £120 and tax would be £20

 

I have ‘Cost’ field on all my products so I can enter the original purchase price in Shopify.

 

Is there any way, or any app for Shopify that can add tax to the product based off a percentage of the cost field for that product?

 

Has anyone got any ideas of best way to implement? VAT Margin Scheme is used by many businesses including car dealers, antique dealers, art gallery owners, etc so I am sure it would be a very useful add on.

kickgame
Excursionist
22 0 8

Thanks, but I already saw that and it doesn't help or solve the problem.

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musicstreet
New Member
1 0 0

Hi,

 

did you manage to get a solution to your margin scheme issue? - I've been looking for a solution too.  my EPOS system which is separate to Shopify does exactly what we need but doesn't integrate with Shopify so I manually have to make a spreadsheet for margin items every vat quarter.  

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Virtuosoaccount
New Member
3 0 0
@kickgame have you found a way round this ?
Please don’t forget to keep a stock book and copies of sales and purchase invoices and also include the sales minus the vat in the box 6 and total purchase on box 7 of the vat return hope that helps.

May be try to add a percentage of 16.67% on profit
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Paul-UK
Tourist
3 0 1

I am Shopify Partner and also looking for a solution to how Shopify can handle the VAT Margin Scheme for a customer we are building a site for who deals in second hand items and definitely needs this feature.  Do shopify staff ever look at these messages?

Really think there must be something we can do.

 

Support please Shopify.

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IndigoAntiques
Tourist
8 0 2

Hi, 

 

We are an antiques & homewares store (www.indigo-uk.com) selling oriental antiques, some are margin scheme, some are 20% VAT - This issue has been compounded by Brexit as we're now deducting VAT for export sales but only 80% of the sales are VAT deductible, the remaining 20% of sales are Margin scheme. 

We went ahead and ticked the box in taxes to "Include or exclude tax based on your customer's country" but now we have the problem that tax is being deducted from all products including Margin scheme ones for all export purchases

We thought we'd solve this by creating a collection with margin scheme products in and then adding a product exemption in the tax section, however, this is not the perfect fix. You can add a tax rate of 20% to try reclaim some of your losses, but there are 2 problems with this:

a) This is misleading as checkout & invoices state taxes at 20%

b) Just to throw a spanner in the works, you can only do this for Rest of World. EU & other countries, Shopify requires you register for a local country VAT code. 

 

Has anyone got a better solution? 

Cheers,

Tom, Indigo Antiques

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IndigoAntiques
Tourist
8 0 2

UPDATE: 

I believe that I have solved this. 

For 20% VAT products:

All 20% VAT products should have 'Charge tax on this product' TICKED

 

For margin scheme products:

1) Make sure 'All prices include tax' & 'Include or exclude tax based on your customer's country' are both ticked in the Settings > Taxes > Tax Calculations

2) Make sure your country tax regions are set up correctly

3) Tag all your margin scheme products as 'Margin Scheme'

4) Select all products tagged as "Margin Scheme" & click 'Edit Products' to enter bulk editor

5) Add the "Charge Taxes" field

6) Select all the products on the page and untick the "Charge Taxes" box

7) You're Done!

 

I'd suggest adding a margin scheme item & a 20% VAT item to your basket on your website and proceed to checkout. Check the VAT calculation & shipping is calculated correctly for shipping to UK, EU & Rest of World just to make sure! 

Note, the only issue I had was doubling up on VAT for UK shipping which was resolved by unticking "Charge tax on shipping rates"

 
Hope this helps. Please let me know how you get on. 
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Tony_Rawson
New Member
3 0 0

I can't see how this is working out the VAT on the margin though? - surely this just makes any product tagged with Margin Scheme VAT exempt... so you still need to do a manual calculation for each VAT return.  have I missed something?

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IndigoAntiques
Tourist
8 0 2

Hi Tony, You're correct.

It doesn't calculate the VAT Margin for you, but personally, that's not a bad thing as for margin scheme, you generally don't want to be telling your customer the VAT (and therefore your profit margin) for margin scheme items. 

My personal solution for this is that we use a separate home made POS / stock management system to calculate our margin profit & margin VAT at the VAT return. You could do the same thing with Excel & an accounts program like Xero.

 

I hope this has at least got some of you half way to a solution. Unless Shopify release Margin Scheme VAT, I don't think you'll find a better one. 

Best of luck,

Tom 

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