Beta This part of GOV.UK is being rebuilt – find out what this means

HMRC internal manual

VAT Margin Schemes

From
HM Revenue & Customs
Updated
, see all updates

Global accounting: What is global accounting?

Global accounting is an optional, simplified system of accounting for VAT on the margin. It provides for a gross margin on the difference between global accounting purchases and global accounting sales in a period. 

Why global accounting was introduced

Global accounting was introduced to assist those dealers who trade in bulk volume, low value goods eligible for the Margin Scheme and who might find it impractical to maintain the detailed records required in Notice 718 The VAT Margin Scheme and global accounting.

The law and global accounting

The legal basis is taken from section 50a of the VAT Act 1994 (Article 7). Article 13 of the VAT (Special Provisions) Order 1995, SI 1995/1268, which draws its vires from the VAT Act, outlines the conditions of global accounting as follows.

Article 13 - (3) The total profit margin for a prescribed accounting period shall be the amount (if any) by which the total selling price calculated in accordance with paragraph (5) below, exceeds the total purchase price calculated in accordance with paragraph (4) below.

(4) For the purposes of paragraph (3) above the total selling price shall be calculated by aggregating for all goods sold during the period the prices (calculated in accordance with article 12(5) or (6) above as appropriate) for which they were sold.

(5) For the purposes of paragraph (3) above the total purchase price shall be calculated by aggregating for all goods obtained during the period the prices (calculated in accordance with article 12(5) above) at which they were obtained and adding to that total the amount (if any) carried forward from the previous period in accordance with paragraph (6) below.

(6) If in any prescribed accounting period the total purchase price calculated in accordance with paragraph (5) above exceeds the total selling price, the excess amount shall be carried forward to the following prescribed accounting period for inclusion in the calculation of the total purchase price for that period.

Features of global accounting

Global accounting effectively allows a tax credit when goods are purchased, unlike the main margin scheme where tax is paid on the margin once a sale has been made. It also allows for a loss on one sale to be offset against the profit made on other sales. For these reasons it is not available for all second-hand goods.

In addition, certain types of goods, which can be easily identified individually regardless of their value, do not qualify for the scheme - see VATMARG03100.