Using the global accounting VAT margin scheme
If you make supplies of second hand goods, works of art or antiques and collectors items you can choose to use this simplified margin scheme to account for VAT.
The Global Accounting Scheme is a simplified version of a VAT margin scheme.
You can use this scheme to account for VAT on the margin between your total eligible purchases and total eligible sales, and not the margin on the sale of individual items.
When you can use the scheme
You can use the scheme if the goods are eligible and you:
- buy and sell bulk volume, low value goods
- are unable to maintain the records required of a standard margin scheme
You can also use the scheme if you:
- split collections of items and either sell the items separately, or use them to form other collections
- combine 2 or more items to produce only one item for resale
- buy an eligible item for £500 or more, and the item is made up of several components valued at less than £500, and you sell the component items individually
Find other goods which are eligible to be sold under the scheme.
When you cannot use this scheme
You cannot use the scheme if you:
- buy eligible items and use them to produce something which is not eligible, (for example, you buy second-hand fabrics and trimmings and make them into cushion covers)
- buy an eligible item for £500 or more, and the item is made up of several components valued at less than £500, and you sell the item in the same state as it was purchased (for example, you purchase the tea set for £600, and you sell it on as a tea set)
- have the VAT shown separately on the invoice
- sell any of the following goods:
- aircrafts
- boats and outboard motors
- caravans and motor caravans
- horses and ponies
- motor vehicles, including motorcycles, except those broken up for scrap(link to scrap section below)
How to use this scheme
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Work out the value of your stock on hand.
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Calculate the VAT due.
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Find out what records you need to keep.
How to value your stock on hand
When you start using the global accounting scheme, you may include any eligible stock on hand.
To value your stock on hand, you must be able to identify the:
- eligible stock
- purchase value
You can get the value from the original purchase invoices. If you’re newly registered or you do not have original purchase invoices you can use another fair and reasonable method.
Any goods you bought on an invoice which shows a separate VAT figure are not eligible for resale under the scheme.
If you do not include your stock on hand in the scheme, on selling that stock you’ll have to pay VAT on the full price.
How to work out the margin and VAT due
VAT is calculated at the end of each tax period.
You should:
- work out the purchase price and selling price
- take away the purchase price from the selling price to work out the gross margin
- multiply the gross margin by 1/6
The VAT due is the difference between what you paid for the goods and what you sold them for, not the overall profit you have made on them.
Purchase price
The purchase price is everything you pay for the goods and follows the same rules as the selling price.
Selling price
The selling price is everything you receive for the goods, whether from the buyer or a third party, including:
- incidental expenses directly linked to the sale
- accessories fitted before the sale
When you work out the value of your total purchases at the end of the first accounting period, you can include the value of any eligible stock you bring into the scheme.
In some accounting periods, your total purchases may exceed your total sales and produce a negative margin, and no VAT is due.
You must carry the negative margin forward to the next period and add it to your purchases in the period.
You cannot offset the negative margin against any other figures or record.
Other goods eligible for the scheme
Sale of scrap
You can include second-hand motor vehicles if you break them up and sell them on as scrap.
If a vehicle has already been entered in your second-hand vehicle stockbook, you should close the entry and transfer the details to your purchase records.
If you buy a scrap motor vehicle for more than £500 you can still use the scheme for disposal of the components.
You cannot use this scheme when any individual components are valued at over £500 or you sell any scrap parts from a vehicle you were charged VAT separately when you bought it.
You must keep the normal commercial documentation to show that the vehicle no longer exists and that the scrap parts are eligible for the scheme.
Bulk purchases and collections
You can use the scheme for bulk purchases and collections if the combined purchase price is over £500.
You cannot use the scheme if an individual item has a purchase value of over £500.
You may sell the item under the normal VAT rules or under a standard VAT margin scheme.
Invoicing
Purchase and sales invoices
You must issue a sales invoice to other VAT-registered dealers and include:
- your name, address and VAT registration number
- the buyer’s name and address
- invoice number
- date of sale
- description of goods (this must be sufficient to enable us to verify that the goods are eligible for global accounting, for example 4 tables, 10 chairs — ’assorted goods’ is not acceptable)
- total price — you must not show VAT separately
- the statement ‘global accounting invoice’
Purchase and sales summaries
You must include the:
- invoice number, if shown on the invoice
- date of purchase or sale
- description of goods
- total price
Selling goods
If you meet the conditions, you may use the scheme when you sell the goods by:
- recording the sale in your usual way, for example, by using a cash register
- issuing a sales invoice for sales to other VAT-registered dealers and keeping a copy of the invoice
- transferring your daily takings for eligible goods or totals of copy invoices to your global accounting sales record or summary
Purchases and sales in foreign currencies
If the individual purchase price of each item on the invoice is below £500, you need to convert the invoice total to sterling before you enter it into your purchase records.
Individual items with a purchase value over £500 are not eligible for this scheme, you must deduct the value of any such items from the purchase invoice total, by:
- converting the total value in foreign currency into sterling using the exchange rate which is current at the time the supply is made to you
- apportioning this figure so as to exclude the item, or items, with individual purchase values over £500
You must enter the net purchase and sale amount in sterling in your records.
If you issue a sales invoice in a foreign currency, you must show the sterling equivalent of the total value of the goods. If you sell more than one item on the same invoice, you need only show the total foreign currency and sterling price on that invoice.
To convert foreign currencies to sterling you must use one of the methods outlined in VAT guide (VAT Notice 700).
Records you need to keep
You must keep records:
- of purchase and sales (link to selling section), together with how you’ve worked out the VAT due
- which are up to date and clearly distinguishable from any other records
- for 6 years
If HMRC cannot check the margins you have declared, VAT will be due on the full selling price of the goods you’ve supplied.
If you lose any goods through breakage, theft or destruction, you must subtract their purchase price from your global accounting purchase record.
You can reclaim the VAT you’re charged on any business overheads, repairs, restoration costs, and so on. You must not add any of these costs to the purchase price of the goods you sell.
If you stop using the scheme or transfer goods as a going concern
In the final period you use the scheme, you must:
- make a closing adjustment to take account of purchases for which you have taken credit, but which have not been sold
- add the purchase value of your closing stock to your sales figure for that period, and pay VAT for the stock which you previously had credit under the scheme
This does not apply if the total VAT due on your stock on hand is £1,000 or less.
These adjustments are separate if you transfer goods as a going concern, which is not subject to VAT.
Selling items outside the scheme
You must adjust your records if you sell items you have included in you purchase records outside the scheme (for example, you export them).
At the end of the period you must deduct the purchase value of the goods you have sold outside the scheme from your total purchases.
If you do not know the exact purchase value, for example, the goods may have been part of a bulk purchase, you must:
- apportion a value
- be fair and reasonable
- be able to demonstrate to HMRC how you determined the value
- keep records of your calculations for 6 years
Further information
You must show any goods you buy or sell using a margin scheme on your VAT return.