Using the auctioneers' VAT margin scheme
How to account for VAT using the auctioneers’ scheme.
The auctioneers’ margin scheme applies to sales made by an auctioneer who sells goods at an auction.
You can use the auctioneers’ scheme to account for VAT on the value of the auction services you supply, not on the hammer price of the goods.
When you can use the auctioneers’ scheme
You can use the scheme if:
- you are an auctioneer acting in your own name (an undisclosed agent) — read section 22 ‘Supplies made by or through agents’ in VAT Notice 700
- you can meet the additional record keeping rules for the scheme in section ‘Records to keep’ in this guide.
Additionally, the goods must either be:
- eligible for the sale under a margin scheme
- new goods sold on behalf of non-taxable persons (read ‘Selling new goods on behalf of non-taxable persons’ in this guide)
If you cannot meet these conditions you’ll have to pay VAT on both:
- the hammer price
- your services to the seller and the buyer under the normal VAT rules for undisclosed agents
Mixing schemes
You can use the auctioneers’ margin scheme for some of your sales and a normal margin scheme for others.
If you sell an item under the normal margin scheme rules, you cannot later apply the auctioneers’ scheme rules to it (or vice versa).
Selling new goods on behalf of non-taxable persons
The auctioneers’ scheme can be used for the sale of all goods grown, made or produced by non-taxable persons (including bloodstock or livestock reared from birth).
To use the concession, you must get a signed certificate from the seller confirming that they’re not registered for VAT nor required to be registered for VAT.
Find further information and an example certificate in paragraph 3.27 of VAT Notice 48: Extra Statutory Concessions.
The certificate can be:
- incorporated into the purchase invoice
- copied from the text in the ‘Certificate’ section of paragraph 3.27 of VAT Notice 48: Extra Statutory Concessions
The certificate must be signed by the seller.
Using the scheme for works of art, antiques and collectors’ items on which VAT has been charged
If you’re an auctioneer, and you act in your own name, you may opt to use the scheme for:
- works of art, antiques and collectors’ items which you’ve imported yourself (as principal on behalf of a third party) for onward sale in your own name
- works of art you obtained from creators or their heirs, provided that both of the following conditions are met:
- they were supplied in the UK, or acquired in Northern Ireland from an EU member state
- they are for onward sale in your own name
This applies whether or not VAT was charged on their purchase or acquisition.
To use this scheme for these goods, you must:
-
Tell HMRC in writing that you are going to take up the option, and specify the date from which you will be applying it.
-
Use the scheme for at least 2 years.
-
Use the scheme for all transactions and goods, not just for certain categories of transactions or goods.
-
Tell HMRC in writing when you wish to stop using the scheme.
Imports of works of art, antiques and collectors’ items are subject to a reduced valuation at import. For more information about the valuation of these goods read How to value goods for import VAT.
You may use the scheme and later decide to sell goods outside the scheme (for example, if you export the goods).
If you do, you cannot recover any input tax on those goods until the period in which you account for their sale.
How to work out the margin and VAT due
You should work out the margin and VAT due following the normal VAT margin scheme calculation, however purchase and selling prices must be calculated as follows.
Purchase price
Your purchase price is the hammer price less any commission charges you make to the seller. You must not include any other services which you supply to the seller.
Selling price
Your selling price is the hammer price plus any charges for services you make to the buyer. For example:
- buyer’s premium or other commission
- incidental expenses such as packing, transport and insurance costs
The purchase and selling prices must not include:
- services which are a separate supply in their own right, for example, providing illustrations in the auction catalogue
- indemnity fees, if an approved insurance company is providing the insurance policy
You must invoice separately for any additional fees and charge VAT under normal VAT rules.
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:
- you handing the goods over to the buyer
- you getting payment
Sales to EU member states
Sales made from Great Britain to EU member states are exports. Read the guidance on exporting goods using the VAT margin scheme.
Sales made under the auctioneers’ scheme within Northern Ireland generally follow the same rules. For further information read Buying and selling goods in Northern Ireland using the VAT margin scheme.
Records to keep
Stock book
Although you must always keep stock records, you do not have to maintain a stock book which is strictly in accordance with the normal margin scheme requirements.
However, if you do not maintain a stock book, you must retain sufficient alternative records which provide all the information normally required in a stock book.
Examples may include:
- entry forms
- sales catalogues
- copies of lots and sales of the day
- copies of sales and purchase invoices
You must record the hammer price for each sale.
Invoicing
You must issue the buyer and seller separate invoices, statements or other documents, which should include:
- your name, address and VAT registration number
- the buyer or seller’s name and address
- a means of cross-referencing between the sales system and the stock book, for example, the stock book number
- invoice number
- date of transaction
- a description of the item
- the hammer price of the goods
- any charges for services made in connection with the sale of the goods — you must not show a separate amount of VAT on any of these charges
- the amount due to the seller (this amount will form your selling price, and the purchase price for a buyer who is VAT-registered and is using a margin scheme)
VAT must not be shown separately.
If the buyer or seller is using a margin scheme, their purchase or selling price must be clear from the invoices you issue. You should allocate any charges included under the scheme against each separate lot.
If you’re selling several items for one seller, you must not put the total commission charged on the invoice for one of the items.
Scheme and non-scheme supplies
You should give separate invoices to the buyer if you sell some goods under the auctioneers’ scheme and some goods under a normal margin scheme. You may include all of the goods sold on the same invoice for each scheme.
The sales price for each item sold under the scheme must be clear for the buyer. This will form the purchase price for a VAT-registered dealer who’ll be selling on the item using a margin scheme.
Further information
You must show any goods you buy or sell using a margin scheme on your VAT return.
Tertiary legislation
You can find the legal conditions in VAT Tertiary Legislation:
- section 2.6 — stock book requirements for the auctioneers’ scheme
- section 4.1 — special invoice rules for the auctioneers’ scheme