Guidance

Auctioneers' Scheme (VAT Notice 718/2)

How the VAT Auctioneers Scheme works and when you may use the scheme to account for VAT on the supplies you make.

Detail

This is a new notice that has been introduced for the VAT Auctioneers’ Scheme. The contents of this notice were previously included in Notice 718.

1. Overview

1.1 Information in this notice

This notice is about the Auctioneers’ Scheme, which is a variation on the VAT Margin Scheme for second-hand goods, antiques, works of art and collectors’ items. It tells you when you may use the Auctioneers’ Scheme to account for VAT on the supplies you make.

It explains:

  • which goods you can include under the scheme
  • how the scheme works
  • how you must calculate the margin
  • what records you must keep

This notice assumes that you have a working knowledge of basic VAT principles, as outlined in Notice 700: the VAT Guide.

If, after reading this notice, you need any further help or advice, contact our VAT Helpline.

1.2 Changes in this notice

The information in this notice used to be contained in Notice 718: Margin Schemes for second-hand goods, works of art, antiques and collectors’ items. We have moved the information which is relevant to auctioneers who opt to use the Auctioneers’ Scheme into this separate, shorter notice.

The rules about declarations on Auctioneers’ Scheme invoices have changed, see section 4 for details.

We’ve updated the notice to reflect the VAT rate of 20%.

1.3 Who should read this notice

You should read this notice if you’re an auctioneer and you want to know about the Auctioneers’ Scheme.

1.4 Force of law

In UK law, Section 50A of the VAT Act 1994 allows the Treasury to make Orders to introduce second-hand schemes.

The VAT (Cars) Order 1992 covers cars.

The VAT (Special Provisions) Order 1995 (as amended) covers all goods other than cars.

Parts of this notice have the force of law under the orders. Paragraphs which have the force of law are indicated by a statement.

2. Basic principles

2.1 How to account for VAT as an auctioneer

If you invoice in your own name and sell goods which would be eligible for sale under the Margin Scheme, there are several options you can choose from to account for VAT on your sales.

You may:

  • use the Auctioneers’ Scheme
  • use the Margin Scheme
  • apply the rules for invoicing as an agent

You do not have to apply the same option to all your sales. This notice is about the Auctioneers’ Scheme. Notice 718: the Margin Scheme and global accounting has more about using the standard margin scheme, and for more general information about margin schemes.

2.2 Definition of the Auctioneers’ Scheme

The Auctioneers’ Scheme is a variation on the standard margin scheme for second-hand goods, works of art, antiques and collectors’ items. It allows you to account for VAT on a margin which is equal to the value of the services you’ve supplied to the seller and the buyer.

Using a margin scheme means that you do not have to account for VAT on the hammer price of the goods.

2.3 How the scheme works

When you calculate the margin under the scheme, you:

  • add the value of your services to the buyer to the hammer price
  • subtract the value of your services to the seller from the hammer price

Section 3 provides full guidance on how to calculate the VAT due under the scheme.

2.4 Conditions for using the scheme

You do not have to use any of the margin schemes as they’re optional.

If you do decide to use one, there are a number of conditions you must meet. If you cannot meet all the conditions, you cannot use the scheme.

The detailed conditions for using the Auctioneers’ Scheme are explained throughout this notice. The main ones are:

  • the goods must be eligible (see paragraph 2.6)
  • you must have acquired the goods in eligible circumstances, in most cases, this means that you obtained the goods for resale in circumstances where you could not claim any VAT back (see paragraph 2.5)
  • you must meet the record keeping rules of the scheme - there are special rules about invoicing and stock records

You must calculate the margin in accordance with the rules of the scheme. There are special rules about how to calculate your buying price, your selling price and your margin under the scheme. The margin you calculate under the scheme may not be the same as your profit margin.

2.5 When you can use the scheme

You can use the scheme if the goods are eligible and the seller is one of the following:

  • not registered for VAT
  • a VAT-registered person supplying goods under the standard margin scheme or Global Accounting
  • an insurance company selling eligible margin scheme goods which it has acquired as the result of an insurance claim (provided the goods are sold at auction in the same state)
  • a finance house selling eligible margin scheme goods which it has repossessed (provided the goods are sold at auction in the same state)

2.6 Goods that are eligible to be sold under the scheme

This is a quick guide to the goods which are eligible to be sold under the margin schemes. If you are in any doubt, you should refer to section 20 at the end of Notice 718: the Margin Scheme and Global Accounting, where we have reproduced the law on eligible goods.

Second-hand goods

The legal definition of second-hand goods is goods which are suitable for further use as they are, or after repair. In most cases, goods which are second-hand in the ordinary usage of the term will be eligible for the margin schemes.

For the special rules about the legal definition of a second-hand motor vehicle, see Notice 718/1: the Margin Scheme on second-hand cars and other vehicles.

Works of art

The legal definition of works of art includes pictures, paintings, collages and drawings executed by hand by the artist. Craft items and items produced in a technical or industrial context may not be eligible to be sold under the margin schemes. If you’re in any doubt, check the list at the end of Notice 718.

Antiques and collectors’ items

The legal definition of an antique is an item, other than a work of art or a collectors’ item, which is over 100 years old.

Not everything which somebody might collect will be included in the legal definition of a collectors’ item for margin scheme purposes. If you’re in any doubt, check the list at the end of Notice 718.

2.7 Categories of goods you cannot sell under the scheme

You must not use the scheme to account for sales of:

  • precious metals
  • investment gold
  • precious stones

There is more information about these categories of goods at the end of Notice 718.

You can only use the scheme to account for sales of air guns if you are registered under the Firearms Act 1968.

2.8 If you also make sales under the normal VAT rules

You can use a margin scheme for some of your sales and the normal rules for others.

But, if you’ve sold an item under the normal VAT rules (that is, you charged VAT on the full selling price), you cannot go back and apply any of the margin schemes to that sale later.

2.9 If you cannot meet all the conditions of the Auctioneers’ Scheme

If you sell an eligible item, but cannot meet all the record keeping, invoicing and accounting requirements, you cannot use either the Auctioneers’ Scheme or the standard margin scheme.

You’ll have to pay VAT on the hammer price as well as on your services to the vendor and the purchaser under the normal VAT rules for undisclosed agents. You can find further information about those rules in Notice 700: the VAT Guide.

It’s important to check with the seller whether the goods are eligible for inclusion in the Auctioneers’ Scheme before you auction them.

3. How to make your Auctioneers’ Scheme calculations

3.1 Calculate VAT on goods you sell under the Auctioneers’ Scheme

As explained in paragraph 2.2, you calculate your margin by taking into account charges for the services you make to the seller and the buyer.

When you’re calculating the amount of VAT due on an individual sale, you must work from the hammer price, as follows:

Your purchase price is the hammer price less any commission charges you make to the seller. You must not include any other services which you supply to the seller.

Your selling price is the hammer price plus any charges for services you make to the buyer. For example, buyer’s premium or other commission, or incidental expenses such as packing, transport and insurance costs.

To calculate your margin, you subtract the purchase price from the selling price.

To calculate the VAT on the sale, you multiply the margin by 1/6 (the VAT fraction).

Paragraph 3.2 explains which charges can be included in your scheme calculations.

There are detailed examples of calculations in section 8.

3.2 Charges to include in your Auctioneers’ Scheme calculations

When you calculate your buying and selling prices under the Auctioneers’ Scheme, you must always include:

  • seller’s commission
  • buyer’s premium
  • any other charges you make to the buyer for incidental expenses such as packing, transport and insurance costs

You must not include:

  • services which are a separate supply in their own right, for example, providing illustrations in the auction catalogue
  • indemnity fees, if an approved insurance company is providing the insurance policy

For more information about insurance provided by a third party, see Notice 718.

You must make sure that:

  • the charges included in your scheme calculations do not show VAT separately
  • your invoices clearly show (for the benefit of both seller and buyer) the respective selling and purchase prices they will need for their own scheme calculations

If you’ve made any charges which are not included in your scheme calculations, you must:

  • invoice for them separately
  • charge VAT on them under the normal rules

3.3 Work out the time of supply

If you’re acting in your own name, the goods you sell are deemed, for VAT purposes, to be both a supply to you and a supply from you.

Because these two supplies happen at the same time, they share a common tax point. This is determined by reference to the actual sale of the goods at auction. The tax point for both supplies will be the earlier of you:

  • handing the goods over to the buyer
  • getting payment

3.4 Sales of zero-rated goods

Under the Auctioneers’ Scheme, a margin is created from the supply of services made to the seller and the buyer. These services are not separately charged with VAT.

If you sell zero-rated goods, for example antique books, your margin will also be zero-rated.

In the VAT due column of your stock record, you should insert ‘nil’.

3.5 Sales to other EC member states

Sales made under the Auctioneers’ Scheme to other member states are treated in the same way as sales within the UK. The sales are liable to VAT in the UK.

The goods will not be subject to acquisition VAT when they are taken into another EC member state, so you should not include them on:

  • EC sales lists
  • boxes 8 and 9 of your VAT returns

See Notice 718 for more detailed information for businesses which use margin schemes about buying and selling within the EC.

3.6 How to treat goods supplied for export

Under the Auctioneers’ scheme

You will be making a combined supply of goods and services, with VAT due on the profit margin, if you:

The liability of your services will follow that of the goods, with the result that the whole supply will be zero-rated. However, you must obtain proof of export, as described in Notice 703, when you apply zero rating to the margin.

Under the Margin Scheme

If you sell the exported goods under the Margin Scheme, the liability of your services will not follow that of the goods because your services are charged and invoiced outside the scheme.

You’ll be able to sell the goods at the zero rate outside the scheme if you can meet the conditions in Notice 703, but your services will normally be standard-rated.

3.7 Goods supplied for export under the retail export scheme

The retail export scheme allows certain overseas visitors to get a VAT refund on goods they buy and export in their personal luggage. You can use the retail export scheme together with the Auctioneers’ Scheme but, if you do, you must account for VAT on the sale until:

  • you get a refund document stamped by UK or EC Customs
  • you’ve made the refund to your customer

You can find more information about the retail export scheme in Notice 704: retail exports.

4. Records and accounts

4.1 Records you must keep

Notice 700/21: keeping VAT records gives guidance on the general records you must keep if you’re registered for VAT.

If you use the Auctioneers’ Scheme, there are some additional record keeping rules which apply to your stock record and invoices – paragraphs 4.2 to 4.8 give details.

These additional rules exist so that there’ll be a clear audit trail of the margin you have achieved on each item you’ve sold. It’s important that you keep to these rules so that you can continue using the Auctioneers’ Scheme. If we cannot check the margins you’ve declared from your records, VAT will be due on the full selling price of the goods you’ve supplied, even if they were otherwise eligible for the scheme.

If you’re not sure whether your records meet the Auctioneers’ Scheme rules, contact our Helpline.

4.2 Stock records you must keep

This section, 4.2, has the force of law.

Although you must always keep stock records, you do not have to maintain a stock book which is strictly in accordance with the requirements set out in Notice 718.

However, if you do not maintain a stock book, you must retain sufficient alternative records which provide the information required in Notice 718.

Examples may include:

  • entry forms
  • sales catalogues
  • copies of lots and sales of the day
  • copies of sales and purchase invoices

4.3 Rules about invoices for the Auctioneers’ Scheme

This section, 4.3, has the force of law.

When you sell an item under the scheme, you must issue an invoice to both the buyer and the seller.

You must issue the:

  • seller with an invoice or statement which includes all the details listed below
  • buyer with an invoice or other document which includes all the details listed below

Purchase invoice or statement

You must issue the seller with an invoice or statement which includes all these details:

  • seller’s name and address
  • your name and address
  • a means of cross-referencing between the sales system and the stock book, for example, the stock book number
  • invoice number
  • date of transaction
  • a description of the item
  • the hammer price of the goods
  • any commission charges you made to the seller (you must not show a separate amount of VAT on these charges)
  • the net amount due to the seller- this amount will form
    • your purchase price
    • the selling price for a vendor who is VAT-registered and is using the Margin Scheme.

If either the seller or the buyer is using a margin scheme, their respective selling and purchase prices must be clear from the invoices you issue. This means that you should allocate any charges included under the scheme against each separate lot.

In other words, if you’re selling several items on behalf of one seller, you must not put the total commission charged to that seller on the invoice for one of the items.

If the purchase invoice shows a separate VAT amount, the item is not eligible to be sold under the scheme.

Sales invoice

You must issue the buyer with an invoice or other document which includes all these details:

  • your name, address and VAT registration number
  • the buyer’s name and address
  • a means of cross-referencing between the sales system and the stock book, for example, the stock book number
  • invoice number
  • date of transaction
  • a description of the item
  • the hammer price of the goods
  • any charges for services made in connection with the sale of the goods (see paragraph 3.2) - you must not show a separate amount of VAT on any of these charges
  • the amount due from the buyer (this amount will form your selling price, and the purchase price for a buyer who is VAT-registered and is using the Margin Scheme)

4.4 Include scheme and non-scheme supplies on one invoice

To avoid causing the buyer confusion, you should issue separate invoices if you sell goods to the same buyer under both the Auctioneers’ Scheme and normal accounting. But you may include all those goods on the same invoice.

If you choose to do this, you must ensure that each supply can be clearly distinguished. The buyer must be able to establish the sales price for those items which were sold under the Auctioneers’ Scheme. This amount will form the purchase price for a VAT-registered dealer who’ll be selling the item on using a margin scheme.

4.5 Re-invoice for goods under the normal rules

If you’ve sold goods under the Auctioneers’ Scheme, and the buyer subsequently decides that they wish to treat the transaction outside the scheme, preferring to pay VAT separately on the hammer price and other charges, you may re-invoice for the transaction under the normal VAT rules.

You can re-invoice for the transaction under the normal VAT rules provided that you’re able to comply with all the relevant VAT regulations for the substitute transaction and, at the time of the amendment, both you and the buyer hold all the original records relating to the transaction.

If you can meet these conditions, and you’re willing to re-invoice, you must cancel the first entry in your records and cross-refer to the amended transaction.

The replacement invoice which you issue to the buyer must:

  • refer clearly to the original transaction
  • state that it’s cancelled and that the buyer should amend their VAT account accordingly

There’s a limit to how long after the due date of the VAT return on which you accounted for the original supply you may issue a replacement invoice. This is because the capping rules prevent input tax being claimed on invoices over a particular age. For up-to-date information about the capping time limits, see Notice 700/45: how to correct VAT errors and make adjustments or claims.

4.6 Auctioneers’ Scheme invoices in foreign currencies

If you issue an invoice under the Auctioneers’ Scheme in a foreign currency, including the euro, you must show the sterling equivalent for each element of the supply. For example, the hammer price of the goods, the amount of commission, other charges due – and not just for the total value of the sale.

To convert amounts into foreign currencies you must use one of the methods outlined in Notice 700: the VAT Guide. Whichever method you adopt, you must use the exchange rate that’s current at the time you make the supply.

4.7 Filling in your VAT return

At the end of each tax period you’ll need to fill in a VAT return. Here are the special rules you must follow for any goods which you’ve bought or sold under a margin scheme during the tax period:

  • box 1 - include the output tax due on all eligible goods sold in the period covered by the return
  • box 6 - include the full selling price of all eligible goods sold in the period, less any VAT due on the margin
  • box 7 - include the full purchase price of eligible goods bought in the period

There’s no requirement to include margin scheme purchases or sales in boxes 8 and 9 of your VAT return.

Further guidance on how to fill in VAT returns is available in Notice 700/12: how to fill in and submit your VAT Return.

4.8 How long you should keep records

Generally, you must keep all your business records for VAT purposes for at least 6 years. If the 6 year rule causes you serious storage problems or undue expense, then you should consult our VAT Helpline. We may be able to allow you to keep some records for a shorter period.

5. The Auctioneers’ Scheme in particular circumstances

5.1 Selling goods on behalf of a pawnbroker

You may use the Auctioneers’ Scheme to sell the goods on behalf of a pawnbroker if:

  • the goods are eligible
  • the value of the pawn is greater than £75
  • the pawn has not been redeemed
  • the pledgor is not VAT-registered

5.2 Selling a horse or pony using the 3-part form

The 3-part form is a document which can be used to account for VAT on the sale of horses and ponies under the standard margin scheme. The 3-part forms come in numbered sets, with a VAT summary sheet at the back. They’re sold by the British Equestrian Trade Association.

When you sell a horse or pony on behalf of a person who is selling it under the standard margin scheme and is using the 3-part form, they’ll give you parts B (pink) and C (yellow) of the partially-completed form.

After the sale you should:

  • complete the reverse of parts B and C
  • give part C to the buyer
  • return part B to the seller

When you sell a horse or pony on behalf of a person who’s not registered for VAT to a person who is registered, you should complete your name, address and lot number on the reverse of part A (white) of the buyer’s form.

For more information about the special three-part form for the sale of horses and ponies under the standard margin scheme, see Notice 718.

5.3 Use the Auctioneers’ Scheme to sell new goods on behalf of non-taxable persons

An Extra Statutory Class Concession, introduced with effect from 1 January 1999, allows the Auctioneers’ Scheme to be used for the sale of all goods grown, made or produced (including bloodstock or livestock reared from birth) by non-taxable persons.

As a condition of using the concession, you must obtain:

  • a signed certificate from the vendor giving the vendor’s name and address
  • a description of the goods
  • confirmation that they’re not registered for VAT nor required to be registered for VAT

You may incorporate the certificate into your existing sales entry in agreement with our Helpline. See section 6 for an example of the certificate.

6. Example of vendor’s certificate for goods sold on behalf of non-taxable persons

Auctioneers’ Scheme for second-hand goods, works of art, antiques and collectors items

Extra statutory concession number 3.27

Vendor’s Certificate for goods grown, made or produced and sold at auction on behalf of non-taxable persons.

I (full name)

………………………………

of (address)

………………………………………………………………………………………

………………………………………………………………………………………

………………………………………………………………………………………

declare that I am not registered or required to be registered for Value Added Tax and that the goods detailed below are to be sold at auction on my behalf by (auctioneer’s name).

Description of Goods

…………………………………………………………………………………………

Date of Sale (to be completed by auctioneer)

…………………………………………………………………………………………

Signature of vendor

…………………………………………………………………………………………

Signature of Auctioneer

…………………………………………………………………………………………

Date

…………………………………………………………………………………………

7. The Auctioneers’ Scheme option for goods on which VAT has been charged

7.1 When you can use the option for goods on which VAT has been charged

When you obtain goods which have had VAT charged on their full value, they’re not normally eligible for the Auctioneers’ Scheme.

But if you’re an auctioneer, and you act in your own name, you may opt to use the Auctioneers’ Scheme for works of art, antiques and collectors’ items which you’ve imported yourself (as principal on behalf of a third party) for onward sale in your own name, and works of art you have obtained (that is, which were supplied in the UK or acquired from another member state) from creators or their heirs, for onward sale in your own name, whether or not VAT was charged on their purchase or acquisition.

If you do not opt to use the Auctioneers’ Scheme or the Margin Scheme (see Notice 718), or you cannot meet the conditions described in paragraph 7.2, you must account for VAT in accordance with the general rules for auctioneers.

You can find details of import procedures and special arrangements for supplies of temporarily admitted goods in Notice 702: imports.

7.2 Conditions for using this option

If you want to take up the Auctioneers’ Scheme option in any of these circumstances, you must meet the following conditions:

  • you must inform VAT general enquiries in writing that you are going to take up the option, and you must specify the date from which you will be applying it
  • you must exercise the option for a period of at least two years, after which you must inform the VAT Written Enquiries Team in writing as and when you wish to stop using the scheme
  • you must use the scheme in respect of all transactions and goods listed in paragraphs 7.1, not just in respect of certain categories of transactions or certain categories of goods
  • if, having exercised the option, you decide to sell any goods covered by the option outside the scheme (for example, if you export the goods), you’re not entitled to recover any input tax on those goods until the period in which you account for VAT on their sale

7.3 Rules on goods held under Temporary Admission

Works of art, antiques, and collectors’ items imported into the UK from places outside the EC member states qualify for a reduced rate of import VAT (currently 5%).

Such goods are often entered for relief under Temporary Admission (previously known as Temporary Importation) in order to be sold at auction.

Once the auction has taken place, the goods are:

If imported, the goods qualify for the reduced rate of VAT but the buyer’s premium does not. You may use the Auctioneers’ Scheme to account for sales of such items by auction, but you must charge VAT on the buyer’s premium at the appropriate rate.

If the goods are finally imported, or declared for entry to Customs Warehousing or Inward Processing Relief after the auction, you must charge VAT on the buyer’s premium at the standard rate.

If the goods are directly re-exported from Temporary Admission following the auction then you may charge VAT on the buyer’s premium at the zero rate.

7.4 Calculate the purchase price for goods held under Temporary Admission

7.4.1 Imported works of art, antiques and collectors’ items

When you opt to use the Auctioneers’ Scheme for imported works of art, antiques or collectors’ items on behalf of an overseas seller, the option will apply to imports at a reduced rate of 5%.

You must not reclaim the import VAT as input tax, or include it in your Auctioneers’ Scheme calculations.

You may, however, wish to recoup the amount from the seller outside the scheme.

You must calculate your purchase price in accordance with the rules in paragraph 3.1

7.4.2 Works of art obtained from the creator or their heirs

When you opt to use the Auctioneers’ Scheme for works of art obtained from the creator or their heirs you must not reclaim any VAT charged by the supplier.

If the work of art is an acquisition you should:

  • account for acquisition tax in box 2 of your VAT return, and
  • not recover the corresponding acquisition tax in box 4 (input tax)

You must calculate your purchase price in accordance with the rules in paragraph 3.1.

The creator, or their heir, will have to account for output tax on the full hammer price, so they may ask you to sell the item under the option for the standard margin scheme (see Notice 718), rather than the Auctioneers’ Scheme.

If you account for the sale under the standard margin scheme, you must show VAT separately on any invoice or statement you issue for charges for your services. This is so that the seller will be able to reclaim the input tax on those charges.

Your purchase price under the standard margin scheme option will be the hammer price only.

8. Example calculations for the Auctioneers’ Scheme

8.1 Introduction

We’ve included this section to help you understand the effect that different scenarios will have on the total VAT you would owe us for the same transaction.

In all of the examples:

  • the hammer price is £1,000
  • the rate of VAT is 20% and the VAT fraction is 1/6
  • the commission is a VAT-inclusive rate of 12%, that is, 10% plus VAT,
  • buyer’s premium is a VAT-inclusive rate of 18%, that is, 15% plus VAT

8.2 Example 1

You sell the item under the Auctioneers’ Scheme.

You charge commission to the seller.

You do not charge buyer’s premium or any other charges to the buyer.

Section Description Value
(a) Hammer price £1,000
(b) Commission charged to seller:

Commission rate times hammer price 12% × 1,000
£120
(c) Purchase price

Hammer price less commission (a - b) 1,000 - 120
£880
(d) Selling Price = Hammer price (a) £1,000
(e) Margin

Selling Price less purchase price (d - c) 1,000.00 - 880
£120
(f) VAT on sale

Margin (e) times VAT fraction 120 × 1/6
£20

8.3 Example 2

You sell the item under the Auctioneers’ Scheme.

You charge commission to the seller.

You charge buyer’s premium.

Section Description Value
(a) Hammer price £1,000
(b) Commission charged to seller:

Commission rate times hammer price 12% × 1,000
£120
(c) Purchase price

Hammer price less commission (a - b) 1,000 - 120
£880
(d) Buyer’s premium

Rate of buyer’s premium times hammer price 18% × 1,000
£180
(e) Selling Price

Hammer price plus buyer’s premium (a + d) 1,000 + 180
£1,180
(f) Margin

Selling Price less purchase price (e - c) 1,180.25 - 880
£300
(g) VAT on sale

Margin (f) times VAT fraction 300 × 1/6
£50

8.4 Example 3

You sell the item under the Auctioneers’ Scheme.

The item you are selling is for export outside the European Community.

You charge commission to the seller.

You charge buyer’s premium.

You must obtain proof of export before you can apply zero rating to the sale. See Notice 703: exports and removals of goods from the UK for more information.

Section Description Value
(a) Hammer price £1,000
(b) Commission charged to seller

Commission rate times hammer price 12% × 1,000
£120
(c) Buyer’s premium

Rate of buyer’s premium times hammer price 18% × 1,000
£180
(d) Purchase price

Hammer price less commission (a - b) 1,000 - 120
£880
(e) Selling Price

Hammer price plus buyer’s premium (a + c) 1,000 + 180
£1,180
(f) Margin

Selling Price less purchase price (e - d) 1,180 - 880
£300
(g) VAT on sale

Zero-rated
Nil

8.5 Example 4

You sell the item under the Margin Scheme.

You charge commission to the seller.

You charge buyer’s premium.

Section Description Value
(a) Hammer price £1,000
(b) Buyer’s premium

Rate of buyer’s premium times hammer price 18% × 1,000
£180
(c) Purchase price (a) £1,000
(d) Selling price

(Hammer price plus buyer’s premium, a + b)
£1,180
(e) Margin

(Selling price less purchase price, d - c)
£180
(f) VAT on sale

Margin (e) times VAT fraction 180 × 1/6
£30

If you sell the item under the Margin Scheme, you must charge commission to the seller on a separate invoice, and account for VAT on the full amount.

Using the figures from this example, the commission to the seller is £100. VAT at 20% on that amount gives a total charge for commission of £120.

Note: the total VAT you declare to us on the sale of this item under the Margin Scheme will be the same as it would have been if you had used the Auctioneers’ Scheme in Example 2. (£30 + £20 = £50.)

If the vendor is VAT-registered, they’ll be able to reclaim the VAT on the separate commission invoice if you’ve used the Margin Scheme for the sale.

8.6 Example 5

You sell the item under the Auctioneers’ Scheme option for imported works of art, antiques or collectors’ items.

The item is valued at import at £500. You pay import VAT at 5% on this value (£25).

You charge commission to the seller.

You charge buyer’s premium.

Section Description Value
(a) Hammer price £1,000
(b) Buyer’s premium

Rate of buyer’s premium times hammer price 18% × 1,000
£180
(c) Commission charged to seller

Commission rate times hammer price 12% × 1,000
£120
(d) Purchase price

(Hammer price less commission, a - c)
£880
(e) Selling price

(Hammer price plus buyer’s premium, a + b)
£1,180
(f) Margin

(Selling price less purchase price, e - d)
£300
(g) VAT on sale

Margin (f) times VAT fraction 300 × 1/6
£50

Note: you can recoup the £25 import VAT you had to pay when the item entered the UK from the seller in the USA, but you must not include it in your Auctioneers’ Scheme calculations.

8.7 Example 6

You sell zero-rated goods (such as antique books) under the Auctioneers’ Scheme.

You charge commission to the seller.

You charge buyer’s premium.

Section Description Value
(a) Hammer price £1,000
(b) Commission charged to seller (exclusive of VAT) £100
(c) Buyer’s premium (exclusive of VAT) £150
(d) Purchase price

Hammer price less commission (a - b) 1,000 - 100
£900
(e) Selling Price

Hammer price plus buyer’s premium (a + c) 1,000 + 150
£1,150
(f) Margin

Selling Price less purchase price (e - d) 1,150 - 900
£250
(g) VAT on sale

Zero-rated
Nil

Your rights and obligations

Read Your Charter to find out what you can expect from HMRC and what we expect from you.

Help us improve this notice

If you have any feedback about this notice email: customerexperience.indirecttaxes@hmrc.gsi.gov.uk.

You’ll need to include the full title of this notice. Do not include any personal or financial information like your VAT number.

If you need general help with this notice or have another VAT question you should phone our VAT helpline or make a VAT enquiry online.

Putting things right

If you’re unhappy with HMRC’s service, contact the person or office you’ve been dealing with and they’ll try to put things right.

If you’re still unhappy, find out how to complain to HMRC.

How HMRC uses your information

Find out how HMRC uses the information we hold about you.

EC

Published 4 April 2011