The VAT Margin Scheme taxes the difference between what you paid for an item and what you sold it for – rather than the full selling price. You pay VAT 16.67% (0ne-sixth) on the difference.
You can use the Margin Scheme when you sell:
- Second-hand goods
- Works of art
- Collectors’ items
You are unable to use the margin Schemes for:
- Any item bought for which you were charged VAT
- Precious metals
- Investment gold
- Precious stones
As well as keeping VAT records when you use a Margin Scheme, you must also keep a stock-book that tracks each item sold under the Margin and copies of purchases and sales invoices.
You can start using a Margin Scheme at any time by keeping the correct records and then reporting it on your VAT return.
You’ll have to pay VAT on the full selling price of each item if you do not meet all the scheme’s requirements.
Knowing how to take control of your business finances to maximise profits can be difficult, especially with the current climate. Knowing the common mistakes to avoid can be difficult and can leave you feeling unsure.
Written: 16 February 2021