How it works for dealers
If you deal in antiques, fine art or collectables and you're VAT-registered, the margin scheme lets you pay VAT only on your profit margin rather than the full sale price — exactly as it does for second-hand goods generally. The VAT due is one sixth of the margin.
| You buy a piece (private seller) for | £1,200 |
| You sell it for | £2,100 |
| Margin (sale − purchase) | £900 |
| VAT due (margin ÷ 6) | £150 |
Under standard VAT you'd owe £350 on that sale. For a trade built on buying from house clearances, auctions and private sellers, the margin scheme is what keeps the numbers working.
What qualifies
The scheme covers second-hand goods, works of art, antiques and collectors' items, provided you bought them in circumstances where no VAT was reclaimable — typically from a private individual, an exempt business, or another dealer selling under the margin scheme. As with all margin scheme goods, if the purchase invoice shows VAT separately, that item can't go through the scheme.
A few categories are specifically excluded — notably investment gold, and items where VAT was charged and reclaimable on purchase. If in doubt about a particular piece, the test is simple: was VAT charged when you bought it? If yes, it's standard VAT.
Restoration costs don't reduce the margin
If you restore or repair a piece before sale, those costs cannot be deducted from the margin before you calculate VAT. The margin is purely sale price minus purchase price. You handle restoration costs separately and reclaim any VAT on them under the normal rules.
High volume, low value? Consider Global Accounting
If you deal in large quantities of low-value collectables — postcards, stamps, coins, bric-a-brac — tracking each item individually is impractical. The Global Accounting Scheme is a simplified variant that works on quarterly totals of purchases and sales rather than item by item. The catch: individual items must cost £500 or less, and anything above that must use the standard margin scheme. You can't mix the two approaches on the same type of goods.
The stock book still applies
Under the standard scheme you must keep a stock book recording each item: a stock number and description, the purchase date and price, the seller's name and address, and the sale date and price. Inadequate records let HMRC charge VAT on the full sale price instead of the margin. More on the stock book requirements here.
Common questions
How is "antique" defined for the scheme?
Broadly, antiques are items over 100 years old, works of art are paintings, sculptures and fine art by named artists, and collectors' items include things like stamps, coins and books. In practice the more important question is usually how you acquired the item, not its precise category — the eligibility hinges on whether VAT was reclaimable on purchase.
What goes on my VAT return?
The VAT on your margins goes in Box 1. The full selling prices feed Box 6 and the full purchase prices feed Box 7 — calculated differently from standard VAT. A common error is putting only the margin in Box 6 rather than the full sale price.
Can I show VAT on the invoice?
No. A margin scheme invoice must not show VAT separately and should carry the required statement, such as "Margin scheme — works of art" or "Margin scheme — second-hand goods" as appropriate.