The Book-keepers Forum (BKF)

Post Info TOPIC: Calculating VAT Margin Scheme and iZettle Fees


Member

Status: Offline
Posts: 8
Date:
Calculating VAT Margin Scheme and iZettle Fees


Hello, we are using the VAT margin scheme on our sales of products (memorabilia and art) that fall into the scheme (pay 16.67% on the difference between the purchase and sale price of the item) and looking for advice on how this should be calculated, also taking into consideration the amount received in the bank is lesser the card terminal fees.

We are using Xero for managing our accounts and bookkeeping. From a little research online we have found Xero to be complicated for these calculations.

However, there is a workaround which requires more work but I would like to hear others thoughts on this before we proceed.

For example, a product which qualifies for the VAT margin scheme sells for £260.00 (£260.00 charged on our iZettle card machine)

The amount actually received in the bank is £255.45 because iZettle takes their fee of 1.75% of every transaction and this is taken before the funds reach our bank account. Our bank account shows £255.45 received. No record of the £4.55 iZettle fee as it is charged before we even see the money from this sale.

Based on this sale example above, we have calculated this as follows:

Purchase price of item - £20.00

Sale price of item - £255.45

VAT (using VAT Margin Scheme) should be paid on 16.67% of 235.45 (sale price minus purchase price of item).

VAT payable = £33.64

 

However, my concern is that the amount on the invoice to the customer is £260.00 but the amount received in the bank account is £255.45.

Do we pay VAT on the amount which is received in the bank account, or the total sale price (money received + izettle fees)?

It doesnt make sense that we should be liable to pay VAT on the £4.55 iZettle fees when that money never actually comes into our accounts.

Please note, the invoices for customers will not show standard VAT amount breakdown as we are using VAT margin scheme so I am also unsure how this should be shown to customers.

To clarify my questions are as follows:

1.     Should we pay VAT on only the amount received in the bank account? based on the example above, the amount liable for VAT would be £235.45.

2.     Should we make a note at the bottom of our invoices to say that we are using VAT margin scheme, therefore standard vat is not applied?
Would we show ZERO vat on the invoices or should it show 16.67%? This is more complicated as you calculate this by working out the margin of sale price minus purchase price customer should never be able to see our original purchase price of the item sold.

3.     If a customer asks for a VAT receipt, how should this be processed?

Thanks for your help and I look forward to the advice anyone can offer on this.



__________________


Master Book-keeper

Status: Offline
Posts: 8646
Date:

Hi
This is a forum for bookkeepers and Accountants, so we cannot answer your questions here.

This is exactly the sort of question you should ask your Accountant or I could recommend a VAT expert.

Probably also worth employing the services of a good bookkeeper who can assist with such a scheme, but ensure they have experience of such a scheme.

You need to read up on the legislation about VAT rules (to cover for example your invoice questions) and then specifically about the margin scheme.



-- Edited by Cheshire on Wednesday 6th of May 2020 10:32:18 PM

__________________

 Joanne 

Winner of Bookkeeper of the Year 2015, 2016 & 2017 

Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.

You should check out answers with reference to the legal position



Master Book-keeper

Status: Offline
Posts: 8646
Date:

Note also, your vat rate is NOT 16.67%

__________________

 Joanne 

Winner of Bookkeeper of the Year 2015, 2016 & 2017 

Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.

You should check out answers with reference to the legal position



Member

Status: Offline
Posts: 8
Date:

Hi Cheshire, Thank you for your reply.

You have said you can recommend a VAT expert - It would be really helpful if you can. Can we please make this arrangement?

You also said above your vat rate is NOT 16.67% but as I understand it is 16.67% for sales that are applicable for VAT Margin Scheme.

__________________


Senior Member

Status: Offline
Posts: 359
Date:

Jpeterson85 wrote:

Hi Cheshire, Thank you for your reply.

You have said you can recommend a VAT expert - It would be really helpful if you can. Can we please make this arrangement?

You also said above your vat rate is NOT 16.67% but as I understand it is 16.67% for sales that are applicable for VAT Margin Scheme.


16.67% is NOT the vat rate.

how many times???!!!



__________________

Caron



Master Book-keeper

Status: Offline
Posts: 3549
Date:

Jpeterson85 wrote:

Hi Cheshire, Thank you for your reply.

You have said you can recommend a VAT expert - It would be really helpful if you can. Can we please make this arrangement?

You also said above your vat rate is NOT 16.67% but as I understand it is 16.67% for sales that are applicable for VAT Margin Scheme.


 Try Les Howard of vatadvice.org, as I know Joanne (Cheshire) would recommend him.

But I think you also need a bookkeeper, because (with respect) you are woefully inept with some basic accounting knowledge. (1) The 16.67% you mention is not the VAT rate.  You are maybe thinking of the percentage needed to deduct off a VAT inclusive price to get to the nett. (16.6666 recurring to be precise)

(1)  Not intended as a slur, I don't expect any of my clients to know bookkeeping, but nor would I expect them to do it if they didn't have the knowledge required.



__________________

John 

 

 

 Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.

Page 1 of 1  sorted by
 
Quick Reply

Please log in to post quick replies.

Tweet this page Post to Digg Post to Del.icio.us
Members Login
Username 
 
Password 
    Remember Me  

©2007-2019 The Book-keepers Forum (BKF). All Rights Reserved. The Book-keepers Forum (BKF) is a trading division of Bookcert Ltd. Registered in England Company Number 05782923. 2 Laurel House, 1 Station Rd, Worle, Weston-super-Mare, North Somerset, BS22 6AR, United Kingdom. The Book-keepers Forum and BKF are trademarks of Bookcert Ltd. This forum is a discussion forum only. There will usually be more than one opinion to any question and any posting should not be viewed as a definitive solution. No responsibility for loss occasioned to any person acting or refraining from action as a result of any posting on this site is accepted by the contributors or The Book-keepers Forum. In all cases, appropriate professional advice should be sought before making a decision. We reserve the right to remove any postings which are offensive, libellous, self-promoting or engaged in covert marketing. We will not notify users of removals. The views expressed in the forum posts are those of the individual and do not necessary reflect or agree with those of The Book-keepers Forum. Any offensive or unsuitable posts will be removed by the moderators. Any reader of this forum can request for a post to be looked into by sending an email to: info@bookcert.co.uk.

Privacy & Cookie Policy  About