Using a VAT margin scheme if you’re an agent
If you’re an agent, find out how to use a VAT margin scheme to account for VAT (VAT Notice 718).
There are different rules to follow if you’re an agent and use a VAT margin scheme.
When you should use these rules as an agent
You are acting as an agent if you sell 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
Your margin will be equal to the charges you make for your services as an 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.
If the owner of the goods uses a margin scheme
The owner of the goods should account for their own sale under a margin scheme if:
- the goods are eligible
- they’ve registered for VAT
- an agent sells the goods on their behalf in their own name
The owner’s purchase price will be calculated in the usual way.
How you charge for your services will affect the final selling price they use for their own margin scheme. Their selling price will depend on whether you have retained a percentage of the selling price or made a separate charge.
You should check with the owner that they have calculated their selling price in the correct way.
How to work out the margin and VAT due
How you work out the margin and VAT due on your services as an agent is different depending on how you charge for your services.
If you invoice your charges separately
If you invoice your charges separately, you must issue:
- an invoice for your charges to the seller with VAT on it
- another separate invoice to the buyer for the goods
Your margin is the difference between the purchase price and the selling price.
Purchase price
This is the total price you receive for the goods, not including any charges made to the buyer.
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.
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.
Work out the VAT due
To work out the VAT due, you should multiply the margin by 1/6.
How using a margin scheme helps you
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 your charges to both the seller and the buyer, and the goods.
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 include your charges in the sale of the goods
Your margin is the difference between the purchase price and the selling price.
Purchase price
This is the total sum you receive for the transaction, not including any charges made to the seller.
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.
Selling price
This is the total sum you receive for the transaction, including any incidental charges you make to the buyer.
If you charge the buyer for any optional services which are not directly linked to the goods, you should invoice for these outside the margin scheme.
Work out the VAT due
To work out the VAT due, you should multiply the margin by 1/6.
How using a margin scheme helps you
Using a margin scheme:
- you’ll pay VAT on your margin, which will be equal to the charges you make to the buyer and the seller
- you will not pay any VAT on the sale price of the goods
If you do not use a margin scheme, you’ll pay VAT on your charges to both the seller and the buyer, and the sale price of the goods.
If you sell zero-rated goods and include your charges in the sale 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.
Records you need to keep
You must keep normal VAT records when you use the margin scheme.