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Recording VAT on Second-Hand Goods in BrightBooks

Shannon Brady
  • Updated

Important: BrightBooks does not currently support VAT on margin schemes or second-hand goods sales directly. However, if you're selling goods where VAT is calculated only on the profit (and not shown on the sales invoice), you can consider the following workaround options.

 

Scenario

  • You purchased second-hand goods with no VAT applied.

  • You’re only accounting for VAT on the profit margin, not on the full sale value.

  • The VAT is not shown on the sales invoice.

 

Workaround Options

Option 1: Manual Journal Entry

  1. Record your sale excluding VAT, as usual.

  2. Calculate the VAT on the profit manually.

  3. Post a journal entry to reflect the VAT due:

    • DR: VAT on Sales (Liability)

    • CR: VAT Output (Profit Margin)

Note: Journal entries do not appear on the VAT return in BrightBooks, so you'll need to manually adjust your VAT return figures outside the system.

 

Option 2: Raise a Separate VAT-Only Invoice

  1. Create a dummy customer called Second Hand VAT.

  2. Raise a VAT-only sales invoice for the VAT calculated on the profit.

    • Use a manual item line for the VAT amount.

  3. This invoice will then be included on the VAT return.

Payment workaround:

  • When paying the VAT to HMRC:

    • Record a customer receipt to clear the VAT-only invoice.

    • Record a non-supplier payment for any remaining VAT not linked to specific invoices.

Summary

BrightBooks does not officially support VAT on second-hand goods under margin schemes. However, users may consider:

  • Manual journals (with off-system VAT return adjustment), or

  • VAT-only invoices using a dummy customer, with manual payment handling.

We recommend customers choose the method that best suits their workflow and consult a qualified accountant if unsure.