Using the VAT margin scheme for repossessed goods and goods subject to insurance claims
How to account for VAT using the VAT margin scheme for repossessed goods and goods subject to insurance claims.
There is information you need to know if you buy and sell repossessed goods, goods subject to insurance claims, and you use the VAT margin scheme.
Repossessed goods
Repossessed goods are goods which have been:
- voluntarily returned under a hire-purchase agreement
- repossessed under the terms of a finance agreement
- returned by a customer under the Consumer Credit Act once they have made 50% of the total payments due
Repossessed goods and goods subject to insurance claims if you’re a bank or financial institution
As a bank or financial institution you may have acquired eligible goods because of either:
- a repossession
- an insurance claim
If you have, you do not have to account for VAT when disposing of these goods provided that the goods are both:
- sold to you in exactly the same state (their condition is generally unaffected by cleaning, or inclusion of instruction manuals if they are otherwise missing)
- obtained from a person who would not have charged VAT on its supply (for example, a private individual)
Finance companies selling refurbished and reconditioned goods
A finance company may sell repossessed second-hand goods where both:
- the goods were originally sold under a margin scheme
- the condition of the goods has since improved
If so, they may sell those goods under a margin scheme.
The condition of the goods will have changed if there have been any improvements, repairs, or replacement parts.
The purchase price for margin scheme purposes will be the original price the finance company paid for the goods.
How to work out the margin and VAT due
You should work out the margin and VAT due following the normal margin scheme calculation.
Records to keep
You should keep the normal VAT margin scheme records.
Further information
You must show any goods you buy or sell using a margin scheme on your VAT return.