What is the VAT margin scheme?
Answered 11 March 2026
Here is a comprehensive explanation of the VAT margin scheme:
What the law says
The VAT margin scheme is provided for under section 50A of the Value Added Tax Act 1994 (VATA 1994), which empowers the Treasury to make orders establishing margin schemes. The primary implementing instrument is the VAT (Special Provisions) Order 1995 (SI 1995/1268), which makes provision for both the second-hand goods margin scheme and the global accounting scheme.
The scheme applies at the election of the taxable person selling the goods, on a transaction-by-transaction basis, to determine the value on which VAT is due. It applies to second-hand goods (including cars) which, when bought in, do not bear VAT.
Where a margin scheme is applied, invoices must carry the reference "margin scheme: works of art", "margin scheme: antiques or collectors' items", or "margin scheme: second hand goods" as appropriate, and the total amount of VAT chargeable is not shown on the invoice.
HMRC guidance / practice
What it is
The VAT margin scheme is a special optional scheme for traders in second-hand goods, works of art, antiques and collectors' items. Normally, VAT is due on the full selling price of goods. The margin scheme instead allows a trader to calculate and account for VAT only on the difference (the "margin") between the buying price and the selling price.
Purpose
The objective of the scheme is to avoid a double tax charge: goods that have already been taxed once when they first entered consumption would otherwise be taxed again on their full value when resold. It also prevents distortion of competition between taxable and non-taxable persons selling second-hand goods.
Key features
- No VAT is payable if no profit is made (i.e. if the buying price exceeds the selling price).
- The scheme is optional and conditional on meeting the scheme's record-keeping rules.
- It applies where the seller was not charged VAT on the purchase.
- Traders who also deal in goods and services outside the margin scheme must account for those supplies in the normal way.
Related schemes
The margin scheme is the basis for two further schemes:
- The Global Accounting Scheme – a simplified version for low-value goods (excluding motor vehicles, caravans, aircraft, boats and horses).
- The Auctioneers' Scheme – a variation for use by auctioneers.
Geographic scope
Goods imported into the UK cannot generally be sold under the margin scheme in Great Britain, except for works of art, antiques and collectors' items where the seller is the importer, or works of art obtained directly from creators or their heirs.
Further detail
Full rules are set out in VAT Notice 718: The VAT Margin Scheme and global accounting and the VATMARG HMRC manual.
Citation sources
If an owner was not charged VAT on the purchase they may use the special margin scheme for second hand goods. This allows them to account for VAT on the profit margin rather than the full selling price. More information about the margin scheme is at Notice 718 The VAT Margin Scheme and global accounting Top of page
VAT is normally due on the full value of the goods you sell. If you trade in second-hand goods, works of art, antiques and collectors’ items, you may be eligible to use the margin scheme. The margin scheme allows you to calculate VAT on the difference (or margin) between your buying price and your selling price. If no profit is made (because the buying price exceeds the selling price) then no VAT is payable. If you use the margin scheme, there are special rules for completing boxes 1, 6, and 7 o
quely identifies the document; b the time of the supply (where relevant), and removal; c the date of the issue of the document; d the name and address of the person to whom the goods are consigned; e a description sufficient to identify the goods supplied or removed; f for each description, the quantity of the goods and the amount payable excluding VAT; g the total amount of VAT chargeable on the removal unless a margin scheme is applied under section 50A of VATA ; h the name, address and regist
For most second-hand goods, there’s a special scheme which allows you to charge tax on the difference between your buying price and your selling price, rather than on the full selling price. Using the scheme is optional and is conditional on meeting the scheme rules about record keeping. There’s also a simplified Global Accounting Scheme and a variation for use by auctioneers. Find more information about: VAT margin schemes Using the VAT margin scheme for second-hand vehicles Using the auctionee
n forms part of the annual calculation. However, where the global calculation results in a negative margin the tax due for the year under the TOMS is £0 and there is no basis for a repayment to the Appellant. Comparison to other margin schemes 55. The Appellant invited a comparison to “other margin schemes”. The Tribunal has therefore considered the second-hand goods margin scheme and the global accounting scheme provided for in section 50A VATA. Pursuant to section 50A the Treasury may, by orde
VATMARG02000 provides guidance on the Margin Scheme which can be used for supplies of second-hand goods, works of art, antiques and collectors’ items. Goods imported into the UK cannot be sold under the Margin Scheme in Great Britain, except for works of art, antiques, collectors’ items where the seller is the importer and for works of art obtained directly from creators or their heirs. Goods supplied in Northern Ireland can be sold under the Margin Scheme if they were in the EU or Northern Irel