Margin scheme - agents and pawnbrokers

By Tolley
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The following Value Added Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Margin scheme - agents and pawnbrokers
  • Agents
  • Pawnbrokers

This guidance note provides an overview of the margin scheme rules that apply to agents and pawnbrokers. If the business selling the second hand goods via an auction then please see the Margin scheme - auctioneers guidance note.

VTAXPER61500; VAT Notice 718 ; VATMARG05000; VATA 1994, s 47(2A); SI 1992/3122, Article 8(6); SI 1995/1268, Article 12(6); SI 1995/1269

This note should be read in conjunction with the Overview of margin schemes and Operating the margin scheme guidance notes.

Agents

Agents act on behalf of other dealers or private individuals in arranging the sale. They usually obtain payment by either retaining a percentage of the selling price or making a separate charge to the seller.

The VAT treatment will depend upon whether the agent is acting as a disclosed or undisclosed agent.

Please see the Agents guidance note for more information on the VAT treatment of supplies made by agents.

Disclosed agent

A business acts as a disclosed agent when the customer is aware of the identity of the party actually selling the goods.

A business can elect to account for any VAT using the margin scheme in the normal way if it meets the relevant conditions and it:

  • sells eligible goods
  • is VAT registered
  • an agent sells the goods on behalf of the business in his own name

The purchase price will be calculated in the normal way. The selling price will depend upon how the agent has accounted for VAT on the sale and the value should be the same as the agent's purchase price (see below).

Undisclosed agent

These agents act in their own name, so the customer will think that the agent is acting

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