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HMRC internal manual

VAT Margin Schemes

Introduction: Law governing the scheme

EC Law

Articles 312 - 341 of the Principal VAT Directive (2006/112/EEC) detail the special arrangements applicable to second-hand goods, works of art, collectors’ items and antiques.

UK Law

Section 50A of the VAT Act 1994 allows the Treasury to make orders to introduce margin schemes.

S.50A Margin schemes

(1) The Treasury may by order provide, in relation to any such description of supplies to which this section applies as may be specified in the order, for a taxable person to be entitled to opt that, where he makes supplies of that description, VAT is to be charged by reference to the profit margin on the supplies, instead of by reference to their value.

Three such orders are currently in force:

  • The Value Added Tax (Cars) Order 1992, SI 1992/3122, as amended;
  • The Value Added Tax (Special Provisions) Order 1995, SI 1995/1268, as amended (This Order covers all goods other than cars); and
  • The VAT (Input Tax) Order 1992, SI 1992/3222, as amended.

The orders referred to in the above paragraph require businesses who use the schemes to keep the records and accounts detailed in Notice 718 The VAT Margin Scheme and global accounting. In this respect, parts of the notice have the force of law.