Recording VAT margin scheme transactions
How to record margin scheme transactions if you do not make a profit on the sale of the goods and what to do if you want to change a margin scheme transaction
Records to keep
You must keep normal VAT records (section 19 of VAT Notice 700) when you use the margin scheme. However, there are some specific records to keep for the margin scheme.
If you don’t make a profit on a sale of margin scheme goods
If your purchase price is higher than, or the same as, your selling price then there is no margin so no VAT will be due. In these circumstances you should show the margin and the VAT due as ‘nil’ in your stock book.
Changing a VAT margin scheme transaction
Re-invoicing outside of a margin scheme
If you’ve sold goods and the buyer later decides that they wish to treat the transaction outside the scheme, you may re-invoice for the goods under the normal VAT rules, provided that:
- you’re able to comply with the relevant VAT regulations for the substitute transaction
- at the time of the amendment, you and the buyer hold the original records for the transaction
If 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 must show:
- the original transaction and advise that it’s cancelled
- that the buyer should amend their VAT account
Find out more about how to correct VAT errors and make adjustments or claims.
Re-invoicing under the margin scheme
If you’ve sold goods that were eligible for sale under a margin scheme outside of a margin scheme, you cannot subsequently treat the supply as a margin scheme supply.
Further information
You must show any goods you buy or sell using a margin scheme on your VAT return.
Tertiary legislation
You can find the legal conditions in VAT tertiary legislation:
- Section 2 – stock book requirements
- Section 3 – stock number
- Section 4 – sales invoice requirements
- Section 5 – self-billed invoices requirements
- Section 6 – global accounting
- Section 7 – pawned goods
- Section 8 – occasional sales
- Section 9 – sale or return
High value goods sold for cash
Accepting cash payments for second-hand goods you sell will not affect your margin scheme calculations. However, if you sell goods for the equivalent of 10,000 euros or more, and take payment for it in cash, you will need to register with HMRC as a high value dealer.