Using a VAT margin scheme if you’re an agent
How to account for VAT using the VAT margin scheme if you are an agent, or a seller using an agent.
There are different rules to follow if you’re using the VAT margin scheme and you’re either:
- an agent
- a seller using an agent
If you’re an agent using a margin scheme:
- you’ll account for VAT on the invoice you issue for your charges to the seller
- your margin will be equal to any charges you make to the buyer
- you will not pay any VAT on the sales value of the goods
If you do not use a margin scheme, you’ll need to declare VAT on the goods, and on your charges to both the seller and the buyer.
When you should use these rules as an agent
You are acting as an agent if you sell eligible goods for or on behalf of other dealers or private sellers and you either:
- retain a percentage of the selling price
- make a separate charge to the owner
Find out more about agents in section 22 of VAT Notice 700.
If you are an auctioneer, you may use these agency rules or the Auctioneers’ scheme.
Agents who can use the scheme (undisclosed agent)
If you’re an agent acting in your own name (sometimes known as an undisclosed agent), you can use a margin scheme when you sell eligible goods.
An undisclosed agent sells goods as principal.
Agents who cannot use the scheme (disclosed agents)
Where you’re an agent not acting in your own name, you will be making a supply of agency services to your clients under the normal VAT rules.
You cannot use the margin scheme.
How to work out purchase and selling prices when using an agent
The seller’s purchase price of the goods will be calculated in the normal way.
The seller of the goods should then account for their own sale as normal, including under the margin scheme if the goods are eligible. The seller’s selling price will depend on how the agent charges for their services.
For a disclosed agent the seller’s selling price will be that obtained by the agent from the purchaser of the goods. The agent’s services are supplied separately and should be invoiced and accounted for under normal VAT rules.
For an undisclosed agent the seller’s selling price will be the price that the agent, acting in his own name, pays for the goods before charging any selling agency fees. The normal margin scheme rules for invoicing apply.
If the seller is using a margin scheme for their sale of the goods to you, this figure will also be their selling price for their margin scheme.
Calculating undisclosed agents’ margin
You should calculate the margin and VAT due following the normal margin scheme calculation. However, the purchase and selling prices should be calculated in the following way.
Purchase price
This is the price that the agent, acting in their own name, pays for the goods before charging any selling agency fees. This should be the same value the seller uses as their selling price.
Selling price
This is the total price you receive for the goods, including any:
- incidental expenses
- commission you charge to the buyer
If you charge the buyer or seller for any optional services which are not directly linked to the goods, you should invoice for these outside the margin scheme.
How to work out the margin and VAT due
You should calculate the margin and VAT due using the normal margin scheme rules.
If you sell zero-rated goods and invoice your charges separately, your charges will fall outside the margin scheme and will be standard-rated for VAT. This is regardless of the liability of the goods.
If you sell zero-rated goods and include your charges to the seller in the sale of the goods, your margin will also be zero-rated. This is because your VAT liability is the same as the goods.
Work out the time of supply
If you’re acting in your own name, the goods you sell are deemed, for VAT purposes, to be both a supply to and from you.
As these 2 supplies happen at the same time, they share a common tax point. The tax point for both supplies will be the earlier of these events:
- you handing the goods over to the buyer
- you receiving payment
Read about tax points in sections 14 and 15 of VAT Notice 700.
Records to keep
You should keep the normal VAT margin scheme records.
VAT returns
You must show any goods you buy or sell using a margin scheme on your VAT return.