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HMRC internal manual

VAT Margin Schemes

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HM Revenue & Customs
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The auctioneers’ scheme: What is the auctioneers’ scheme?

The auctioneers’ scheme was introduced on 1 June 1995, and was devised for auctioneers selling eligible goods in their own name on behalf of a third party vendor: see Notice 718/2 The VAT Auctioneers’ Scheme.

How the auctioneers’ scheme works

The scheme is similar to the Margin Scheme and works by creating a margin which is equal to the auctioneer’s charge for his services to the vendor and the purchaser.

The auctioneer can only include commission to the vendor in his margin: ancillary charges, such as illustration charges, cannot be included for the purposes of calculating the margin.

Indemnity fees charged to the buyer should not be included when calculating the margin if the insurance policy is provided by an approved insurance company and is shown on the invoice.

When considering which charges should be included in margin scheme calculations, and which should be invoiced separately, you should adopt a flexible approach and also bear in mind equity and the revenue risk.

Detailed guidance on assurance of auctioneers can be found in V1-37 Auctioneers.

The following example illustrates how the auctioneers’ scheme works.

Supply of goods from vendor to auctioneer Supply of goods from auctioneer to buyer
Hammer price = £10,000  

Commission (11.75%) = £1,175

Total received for goods = £8,825 (i.e. hammer price less commission)

No input tax Hammer price = £10,000

Buyer’s premium (11.75%) = £1,175

£10,000 paid for goods

Total received for goods = £11,175 (i.e. hammer price plus buyer’s premium)

Auctioneer accounts for VAT under this scheme as follows.

(A) Selling price = £11,175 (hammer price + buyer’s premium).

(B) Purchase price = £8,825 (hammer price - vendor’s commission).

Margin (A-B) = £2,340.

Output tax (7/47) = £350.

Liability = £350.

If the vendor is a VAT-registered person supplying goods under the margin scheme, his selling price is £8,825.

Auctioneer selling under the Margin Scheme

The auctioneer’s scheme is optional and the auctioneer may decide, in conjunction with his client, not to use it for any particular transaction.

If he chooses not to use the scheme, he may decide to account for VAT under the Margin Scheme as follows.

Supply of goods from vendor to auctioneer Supply of goods from auctioneer to buyer
£10,000 credit for goods  

commission deducted

£8,825 received

(Input tax on commission charges recoverable, subject to normal rules) Hammer price = £10,000

Commission (11.75%) = £1,175

£10,000 paid for the goods

Plus £1,175 paid for buyer’s premium

Auctioneer accounts for VAT under the Margin Scheme as follows.

The buyer’s premium is VAT-inclusive. £1,175 x 7/47 = £1000, so the auctioneer accounts for output tax of £175 outside the scheme).

(A) Selling price = £11,175 (hammer price + buyer’s premium).

(B) Purchase price = £10,000 (hammer price).

Margin (A-B) = £1,175.

Output tax (7/47) = £175.

Liability = £350.

If the vendor is a VAT-registered person supplying goods under the Margin scheme, his selling price is £8,825.

If the buyer is VAT-registered, he can reclaim the input tax on the buyer’s premium under the normal rules.

See also VTAXPER61500.