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Must auctioneers pay VAT on goods they sell on behalf of other companies?

Friday, 30 January 2015   (0 Comments)
Posted by: Author: SAIT Technical
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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.



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