There are a few VAT margin schemes. The margin schemes work by allowing qualifying businesses to account for VAT on their profit margin i.e., on the difference between the cost of acquiring an item and its sale price rather than on the full selling price.
Without the margin scheme, the business would have to account for VAT on the full selling price of each item. If an item is sold for less than was paid for it, then no VAT is due on the sale.
The eligible goods are:
- Second-hand goods – defined as tangible movable property that is suitable for further use as it is or after repair, other than works of art, collectors’ items, or antiques and other than precious metals or precious stones as defined.
- Works of art and collectors’ items. The legal definition of works of art includes pictures, paintings, collages, and drawings executed by hand by the artist
- Antiques. The legal definition of an antique is an item, other than a work of art or a collectors’ item, which is over one hundred years old.
It is the business’s responsibility to provide satisfactory evidence of an item’s eligibility for the scheme. A list of ineligible goods can be found in Notice 718 The VAT Margin Scheme and global accounting.
Call MJB Avanti | 08000 388799 for help with tax planning and submissions, we assist clients with cash flow forecasts, budgeting, and compliance to achieve their financial goals.