Goods eligible for the VAT margin scheme
What goods are eligible and not eligible for the scheme and what purchase conditions apply.
You can choose to use the VAT margin scheme:
- for eligible goods
- where the conditions of purchase are met
If some of the items you buy and sell are not eligible for a margin scheme, you should charge and reclaim VAT for those items in the normal way.
Eligible goods
You can choose to use a margin scheme when you sell:
- second-hand goods
- works of art
- antiques
- collectors’ items (excluding investment gold coins)
These are goods on which you were not charged VAT, and are normally purchased from private individuals or from a business selling under a margin scheme.
Second-hand goods
Goods that can still be used, or which could be used after repair.
In most cases, goods which are second-hand in the ordinary usage of the term will clearly fall within this definition.
Works of art
Most items normally described as ‘works of art’ are eligible, but there are some exceptions.
Antiques
Antiques are goods that are over 100 years old.
Collectors’ items
Collectors’ items are stamps, coins and currency and other pieces of scientific, historical or archaeological interest. Not all items that can be collected are eligible for a margin scheme.
Find out more about what goods qualify as works of art, antiques and collectors’ items in the guidance How to value goods for import VAT.
Imported goods
Goods imported from outside the UK are not normally eligible to be sold under a margin scheme. However, there are special rules for importing works of art, antiques or collectors’ items.
These goods are also eligible for reduced valuation at import.
Works of art bought directly from the creator or their heirs
You may opt to use a margin scheme (or global accounting) for works of art you have obtained from creators or their heirs:
- in the UK
- in Northern Ireland that were acquired from an EU member state
This option applies whether or not VAT was charged on their purchase or acquisition.
When you opt to use a margin scheme you must not recover any VAT you’re charged. Under the margin schemes, your purchase price will be the total price of the work of art inclusive of any VAT.
Selling goods privately
The private sale of goods which are not assets of your business is usually outside the scope of VAT and no VAT is due.
However, you can use the margin scheme for the sale of an eligible item if you:
- are a sole proprietor
- sell an eligible item which you transfer to your business from your private holdings
You must be able to produce evidence of the purchase price when you bought the item for your private use. If you cannot do this, you must account for VAT on the full sales value.
If you only make occasional sales of eligible goods
You may use the margin scheme if:
- you are not in business to buy and sell second hand goods
- you occasionally find yourself with an eligible item to sell
You do not need to comply with the full record-keeping requirements, provided you:
- meet the other conditions of the scheme
- hold evidence of both the purchase and selling price
Goods not eligible for the scheme
Certain goods are not eligible to be sold under a margin scheme.
Precious metals
This includes:
- goods (including coins) consisting in precious metals
- any supply of goods containing precious metals
You cannot use the VAT margin scheme where the consideration for the supply (excluding any VAT) is, or is equivalent to, an amount which does not exceed the open market value of the metal contained in the goods.
For gold coins sold at or below the open market value (that is the daily ‘fix’ price) the special accounting and payment system for gold transactions applies. Further details can be found in Gold acquisitions, imports and investments (VAT Notice 701/21).
Precious stones
Precious stones of any age which are not mounted, set or strung.
For the purposes of the margin schemes, precious stones are diamonds, rubies, sapphires and emeralds.
Investment gold
Gold coins which meet the definition of investment gold are not considered of numismatic interest and are not eligible for the margin schemes.
Further details about investment gold can be found in Investment gold coins (VAT Notice 701/21A).
Producing other goods from eligible goods
You cannot use the scheme if you buy eligible items and use them to produce something which is not eligible.
For example, you buy second-hand fabrics and trimmings and make them into cushion covers.
How to deal with gifts
You cannot use the margin scheme when you sell an item which was given to you. You must account for VAT on the full selling price.
If you give away a gift which would have been eligible for sale under the margin scheme, no VAT is due. You must include full details of the person you gave the item to in your stock book.
Purchase conditions
Goods are usually only eligible for the scheme if you were not charged VAT when you purchased them.
The most common ones are where you buy the goods from:
- a private individual
- an unregistered business which does not have to charge VAT to you
- another business which is selling them on to you under a margin scheme
If you have bought an item and VAT is shown separately on the purchase invoice, you cannot sell that item under a margin scheme, even if you have not claimed the VAT back.
The only exception to this rule is where you opt to use a margin scheme for imported works of art, antiques and collectors’ items and for works of art obtained from creators or their heirs.
Spare parts, services and overheads
Spare parts and other costs incurred to repair or improve margin scheme goods cannot be included in the scheme and the purchase price should not be adjusted. Any VAT charged can be deducted as normal.
If these are invoiced separately to the purchaser of the margin scheme goods, then VAT must be charged in the normal way. Otherwise, the selling price of the margin scheme goods will include these costs.
Business overheads are not part of the scheme and should be accounted for normally.
VAT return
You must show any goods you buy or sell using a margin scheme on your VAT return.