VAT liability when old goods are traded in and new ones are purchased
A furniture retailer wants to introduce a “part-exchange” system to generate more sales. My understanding is that in respect of VAT they will need to declare output tax on the full selling price of the new furniture and the part exchange value is merely treated as part of the consideration for the product they are selling.
However my client’s view is that the arrangement is more in line with a discount because the part exchange amount is based on a percentage of the selling price up to a maximum of 15%.
If the furniture being traded in is of poor condition the discount will be less than 15% and the contract with the customer allows him to refuse to accept furniture that is not of saleable quality.
There is also a £300 cap on the maximum value of the old furniture he accepts from...
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