VAT dischord

A potential new client buys and sells antique musical instruments which he said are dealt with under the margin scheme.

In principle I agree but his company has not yet registered for VAT because he thinks its turnover is below the threshold. This is where the problem starts.

The client also advised us that: on starting the business he transferred (sold) a personal collection of instruments to his new limited company for £100 000; the last accounts show a turnover of £105 000; and the majority of the instruments sold originated from his personal collection.

The client thinks that for VAT purposes he can ignore the sale proceeds up to the amount for which he introduced them into the business. This seems right if he were registered and operating under the margin scheme.

However I think he also believes that the VAT threshold only applies...