The following Value Added Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:
This guidance note provides an overview of how the margin scheme operates and should be read in conjunction with the following guidance notes:
Overview of margin schemes
Global accounting margin scheme
Margin scheme ― agents and pawnbrokers
Margin scheme ― auctioneers
Margin scheme ― horses and ponies
Margin scheme ― secondhand motor vehicles
VATA 1994, s 50A; De Voil Indirect Tax Service V7.244, V3.531; SI 1992/3222, Article 2; SI 1995/1268, Article 12; FA 1995, s 24; Notice 718: The VAT margin scheme and global accounting; VATMARG02000
The purchase price is everything the business is required to pay in order to purchase the goods. It will include the following types of costs charged by the supplier:
The business must not include any repair, maintenance or other costs incurred that are required in order to sell the goods in the purchase price.
Business overheads must also be excluded from the purchase price of the goods.
Businesses must be following these steps when purchasing goods they intend to sell under the margin scheme:
step 1 ― confirm that the goods are eligible to be sold under the scheme ― see the Overview of margin schemes guidance note
step 2 ― obtain a purchase invoice. If the business is purchasing the goods from a seller who does not need to issue an invoice, it must draft an invoice showing the relevant details (see below). If the seller shows VAT as a separate amount on the invoice then the margin scheme cannot be used and the normal VAT accounting rules will apply
step 3 ― enter details of the item purchased into a stock book. The purchase price of the goods must exclude any refurbishment / repairs / maintenance work, etc as these costs must not be added to the purchase price. If a number of items are purchased from the
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