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HMRC internal manual

VAT Margin Schemes

Global accounting: Treatment of scrap and items broken up for use as spares

Motor vehicles are excluded from the global accounting scheme under Article 13 of the VAT (Special Provisions) Order 1995, but scrap is not.

However, where a car is broken up by a salvage business, global accounting may be used for the onward sale of the parts, provided they are eligible under Articles 12 and 13 of the Special Provisions Order.

What records must be kept for items sold as scrap?

Where a car has already been entered into a second-hand car stock book, the entry should be closed and the details transferred to the global accounting records. Normal commercial documents must be kept to show that the vehicle no longer exists, in order to demonstrate that it is eligible for global accounting, for example, an end of life certificate issued by the DVLA.

This treatment may be applied to any transactions where eligible margin scheme goods are purchased with a value exceeding £500 and are broken down for onward sale as eligible goods. Individual items can then be sold under global accounting if their purchase value was less than £500. However, the treatment cannot be applied where eligible second-hand goods are recycled and sold on as new goods, for example, where scrap parts are melted down and sold on as metal bars.