If your business is VAT-registered and you’re selling old equipment, you might be wondering how VAT applies. Whether you’re selling office furniture, machinery, or IT equipment, here’s a simple guide to help you stay compliant with the rules.
1. Do You Need to Charge VAT?
In most cases, yes! If your business is VAT-registered, you generally need to charge VAT when selling old equipment, just like when selling new goods.
You must charge VAT if:
- You originally bought the equipment for your business and reclaimed VAT on it.
- You’re selling to another VAT-registered company or an individual.
You don’t need to charge VAT if:
- The equipment is exempt (e.g., certain medical or educational items).
- You originally bought it from a non-VAT-registered seller and didn’t reclaim VAT.
2. What VAT Rate Applies?
- Standard Rate (20%) – Applies to most equipment sales.
- Reduced Rate (5%) – Applies to some energy-efficient equipment.
- Zero-Rated (0%) – Applies to specific industries (e.g., certain mobility aids).
3. What If You Sell to Another VAT-Registered Business?
If you’re selling to another VAT-registered company, you must:
- Include VAT on the invoice (unless the item is zero-rated or exempt).
- Provide a proper VAT invoice with your VAT number and breakdown of the VAT amount.
4. Selling to Customers Outside the UK?
If you sell old equipment to a buyer in the EU or internationally this will be treated as zero-rated and you should keep proof of export.
5. Selling Under the VAT Margin Scheme
If you originally bought the equipment second-hand and didn’t reclaim VAT, you might be able to use the VAT Margin Scheme.
- You only pay VAT on the profit (margin), not the total sale price.
- You can’t reclaim VAT on purchases under this scheme.
6. Keeping Proper Records
To stay on the compliant with HMRC, always:
- Keep invoices and receipts for all equipment sales.
- Record whether VAT was charged or not.
- If using the Margin Scheme, track purchase and sale prices separately.
Final Thoughts
Selling old equipment is straightforward, but VAT rules can vary depending on how you bought the equipment and who you’re selling to. If you’re in doubt, please do not hesitate to contact a member of the VAT team on 01227 277667, or by emailing at vat@mphaccountants.co.uk.
