What Are VAT Margin Schemes and Am I Eligible?
- Feb 6
- 3 min read
VAT Margin Schemes are special VAT accounting methods created to make VAT fairer for businesses that sell second-hand goods, antiques, collectibles, and works of art. Instead of paying VAT on the full selling price, VAT is charged only on the profit margin — the difference between the purchase price and the selling price.
This approach is particularly important for dealers in used goods, where VAT may already have been paid when the item was first sold new. Charging VAT again on the full resale value would lead to double taxation and make prices uncompetitive.
Understanding the Basic Principle
Under a VAT Margin Scheme, VAT is included within your profit margin and is not shown separately on invoices. This means:
You still pay VAT to the tax authority
The buyer cannot reclaim VAT
VAT applies only to the profit, not the total sale price
Margin schemes are commonly used by antique dealers, coin and banknote sellers, art dealers, vintage shops, and second-hand traders.
Types of Goods Covered by VAT Margin Schemes
VAT Margin Schemes can be used for:
Second-hand goods
Antiques (over 100 years old)
Collectibles (coins, banknotes, stamps, medals)
Works of art (original paintings, sculptures, limited prints)
Each category has specific rules, but the core principle remains the same: VAT is calculated only on the margin.
How VAT Is Calculated Under a Margin Scheme
VAT is calculated using the VAT fraction. At the standard UK VAT rate of 20%, the VAT fraction is 1/6.
This means:VAT due = Margin × 1/6
