Must auctioneers pay VAT on goods they sell on behalf of other companies?
30 January 2015
Posted by: Author: SAIT Technical
Author: SAIT Technical
Q: A client of mine is an auctioneer who auctions goods on
behalf of insurance companies. He also buys goods to auction. What should I be
aware of when it comes to the VAT treatment of goods sold by auctioneers?
A: As a standard principle auctioneers are agents as far
as VAT is concerned per s54(1) VAT Act in respect of the goods sold on behalf
of others. The agent may issue the invoice in respect of the supply as agent
but the principal will have to account for the VAT output. The auctioneer must
then also retain the documentation as required in s54(3) VAT Act in respect of
the principal. The auctioneer as agent will only have to account for VAT on his
or her sales commission earned.
However section 54(5) VAT Act also
provides a special dispensation that when the principal and the auctioneer
agree to have a supply by auction of any goods, other than a taxable supply,
treated as if the supply were made by the auctioneer and not by the principal,
the supply will be charged with tax as if it were made by the auctioneer in the
course or furtherance of the auctioneer’s enterprise. The auctioneer may then
recover the amount of tax charged on the supply from the principal or retain or
deduct the relevant amount out of any money in the auctioneer’s hands belonging
or payable to the principal.
The auctioneer must in both
instances maintain the records contemplated in s 20(8) VAT Act as if the
principal made a supply of second-hand goods to him or her, not being a taxable
supply. The auctioneer will then have to account for VAT output tax on the sale
of the goods, even though you would not have had to account for vat on the
supply had you sold the goods without the intervention of the auctioneer.Where the auctioneers purchases goods
for sale, such goods will be treated as normal as if the auctioneer was trading
in such goods and he would have to account for the output tax on such sales.
Disclaimer: Nothing in this query and answer should be construed as
constituting tax advice or a tax opinion. An expert should be consulted for
advice based on the facts and circumstances of each transaction/case. Even
though great care has been taken to ensure the accuracy of the answer, SAIT do
not accept any responsibility for consequences of decisions taken based on this
query and answer. It remains your own responsibility to consult the relevant
primary resources when taking a decision.