Overview of margin schemes

Produced by Tolley
Overview of margin schemes

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

  • Overview of margin schemes
  • What are margin schemes?
  • Scheme conditions
  • Northern Ireland
  • What items can be included in the margin scheme?
  • Occasional sales of margin scheme goods
  • Finance / insurance companies
  • Buying goods from an insurance company or finance house
  • Transfer of a business as a going concern
  • Assignments

This guidance note provides an overview of the margin schemes that businesses may wish to use in respect of sales of the following second hand items:

  1. second hand goods

  2. works of art

  3. collectors items

  4. items sold under the global accounting scheme

VATA 1994, s 50A; VAT (Special Provisions) Order, SI 1995/1268 ; De Voil V3.532; Notice 718 The VAT Margin Scheme and global accounting; 2006/112/EEC, Articles 312 - 341; VATMARG02000

This note should be read in conjunction with the following guidance notes:

  1. Operating the margin scheme

  2. Global Accounting margin scheme

  3. Margin scheme - auctioneers

  4. Margin scheme - second hand motor cars

  5. Margin scheme - horses and ponies

  6. Margin scheme - agents and pawnbrokers

It should be noted that using the scheme is not compulsory and goods eligible for the scheme can still be sold outside the scheme in the normal way even if they were purchased from a seller using the scheme. Also, if an eligible item is sold but all the conditions of the scheme are not met, the margin scheme cannot be used and the sale must be dealt with outside the scheme in the normal way.

What are margin schemes?

Margin schemes are an optional VAT accounting methods that can be adopted by relevant businesses. The output tax due is calculated on the margin made on the goods rather than the full selling price.

There are three margin schemes currently in operation which are:

  1. margin scheme for second hand goods, second hand cars, works or art, antiques and collectors items

  2. global accounting. This scheme deals with low value, bulk volume goods some dealers handle and the impracticality of keeping detailed records of purchases and sales. Under the scheme, VAT is accounted for on the difference between the total purchases and sales of eligible goods in each VAT period rather than on an item by item basis. See the Global Accounting margin scheme guidance note for more information

  3. VAT auctioneers' scheme

VAT is normally due on the

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