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HMRC internal manual

VAT Margin Schemes

The auctioneers’ scheme: Sale of new goods on behalf of non-taxable persons

An extra-statutory concession (ESC) introduced with effect from 1 January 1999 allows the auctioneers’ scheme to be used for the sale of all goods grown, made or produced (including bloodstock or livestock reared from birth) by non-taxable persons.

The ESC is worded as follows.

“VAT: Use of the Auctioneers’ Scheme for Sales of Goods at Auction On Behalf of Non -Taxable Persons

An auctioneer selling, on behalf of a third party vendor who is a non-taxable person, goods which have been grown, made or produced (including bloodstock or livestock reared from birth) by that person, may enter the goods into the auctioneers’ scheme provided he holds a certificate from the vendor which includes:

  1. vendor’s full name and address,
  2. description of the goods and date of sale,
  3. declaration that the vendor is not registered and not required to be registered for Value Added Tax,
  4. signature of vendor and date,
  5. signature of auctioneer and date,

and all other conditions of the scheme are met. The completed certificate must be retained with the relevant records for VAT purposes.”

The ESC is contained in Notice 48 Extra-Statutory Concessions.

Background to the concession

Under section 47(2A) of the VAT Act 1994, supplies of goods made by an agent (including an auctioneer) acting in his own name are deemed for VAT purposes to be supplies made both to him and by him.

This means that new goods, sold by an unregistered person through the agency of an auctioneer, would be taxable on the full selling price whereas, if the person sold them himself, there would be no charge to tax.

The auctioneers’ scheme mitigates the effect of section 47 by allowing VAT on eligible goods to be calculated in a way that taxes the auctioneer’s services, but not the goods themselves. Without the ESC, only goods which would be eligible for the second-hand margin scheme could be sold under the auctioneers’ scheme. The ESC extends that eligibility to new goods sold at auction on behalf of non-taxable persons.

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Conditions for use of the ESC

A condition of the relief is that auctioneers must obtain a signed certificate from the vendor giving

  • details of the vendor’s name and address,
  • a description of the goods, and
  • confirmation that he / she is neither registered, nor required to be registered, for VAT.

An example of the certificate is given below.

As with any ESC, it will not apply in any case where the conditions are not met, and it can be withheld in the particular circumstances of any case if an attempt is made to use it for the purposes of tax avoidance or evasion.

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Commercial documentation

Auctioneers may request that the certificate is included in other commercial documentation, such as sale entry forms. You may allow this in agreement with the trader, provided you are satisfied with the proposed documentation.

It would be advisable to confirm the agreement in writing for future assurance purposes, and in case the concession is abused.

If you encounter any abuse of the ESC you should report the details to the VAT Supply policy team.