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HMRC internal manual

VAT Taxable Person Manual

From
HM Revenue & Customs
Updated
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Particular trades: auctioneers

Agent or principal?

The main activity of auctioneers is to act as agent for the vendor of the goods and arrange for a sale to be made to the highest bidder. However, they occasionally act as principal and buy and sell goods in their own right. The key to distinguishing agent and principal activities is title to the goods. Only when this has passed to the auctioneer does the auctioneer become a principal. However, even where he is acting as an agent he will be required to account for output tax on the sale of the goods if he is acting in his own name and is NOT using the auctioneers’ scheme - seeVAT Notice 718/2: The VAT Auctioneers’ Scheme.

Adopting uncollected goods

When they adopt uncollected goods, auctioneers act as principal, rather than as agent. This usually occurs because an auctioneer pays vendors the net proceeds of the sale before the end of the period in which the purchaser must pay for those goods and collect them. If the purchaser does not collect and pay for those goods, the auctioneer will then adopt them at the price realised on the abortive sale. The auctioneer must then account for VAT on the full sale price at the subsequent sale unless, of course, the goods are being sold under one of the second hand schemes.

VAT accounting arrangements

If the auctioneer is an agent for the vendor but acts in his own name in relation to a sale of goods, he is treated as both receiving and making the supply of the goods under section 47(2A) of the VAT Act 1994 in accordance with normal VAT rules governing supplies through agents: see VTAXPER37500. The auctioneer is regarded as acting in his own name if he issues an invoice or demand for payment for the goods rather than the vendor. He is then liable to account for VAT on the sale of the goods regardless of the VAT status of the vendor but if the vendor is VAT registered, the auctioneer may deduct the VAT on the supply to him, subject to normal rules.

Auctioneers may however, choose to account for tax on a margin basis under the special auctioneers’ scheme for sales of eligible goods. Like other agents, auctioneers may also use the normal margin scheme where appropriate. Further details of the schemes, including a list of eligible goods, can be found in

Like any other agents, auctioneers remain responsible for accounting for output tax on the value of their own services supplied to the vendor (their principal). They may also charge a buyer’s premium to the purchaser which is the consideration for a separate supply of services to the buyer and is standard-rated. If the auctioneer has chosen to operate the auctioneers’ scheme, VAT will be due on the margin created by taking into account the charges for the auctioneer’s services to the vendor and the buyer.

Problem areas for auctioneers: disbursements

The normal rules of disbursements apply to the agency activities of auctioneers. For example, where the vendor is asked to contribute towards the cost of printing a sale catalogue, this cannot be treated as a disbursement by the auctioneer. The supply of the catalogue (usually zero-rated as printed matter) is to the auctioneer, not the vendor, and thus forms part of the value of the auctioneer’s onward supply of services. (See also VTAXPER38000).

Problem areas for auctioneers: goods sold in satisfaction of a debt

Auctioneers who arrange sales of goods which form part of a VAT registered person’s business assets and which are sold in satisfaction of a debt should account for tax under a special procedure - see Section 18: Credits and debts of Notice 700: The VAT guide.

Sales of goods by agents

See VTAXPER37500 for treatment of sales of goods by agents under s47 of the VAT Act.