VAT margin scheme introduced by HM Revenue and Customs for second hands goods businesses.
You can use the margin scheme if you are selling:
- Second hands goods
There are special rules for selling:
- Used cars
- Horses and ponies
- Houseboats and caravans
You cannot use the margin scheme for :
- precious stones
- precious metals
- investment gold
- item you bought for which you were charged VAT
Calculate the VAT under the scheme
Say, you bought a second hand painting for £20,000 and you sold it for £35,000. Using the margin scheme, you pay VAT at one sixth on the difference (the margin) which is 16.67% thus the VAT amount payable to HMRC is £2,500.
Global Accounting scheme
For high volume and low price items, you may use the Global accounting scheme. It is a simplified version of the margin scheme.
Contact HMRC directly if you have any questions about second hands goods VAT scheme.
Other VAT schemes
There are other VAT schemes available for businesses in the United Kingdom. Most popular VAT schemes for small businesses are cash accounting and annual accounting schemes.
VAT cash accounting is beneficial for small businesses who grant credit terms to its customers because your business does not have to pay HMRC before you actually received the cash from your customers.
Whereas for VAT annual accounting your business only have to submit a VAT return once a year.