Free Tool for UK Dealers
Calculate VAT under the UK Margin Scheme. Enter your purchase and selling prices to see the margin, VAT at 1/6, and your net profit.
Subtract the purchase price from the selling price. For example: bought at £500, sold at £800 — the margin is £300.
VAT under the Margin Scheme is 1/6 (16.67%) of the positive margin. On a £300 margin, VAT = £50. If the margin is zero or negative, no VAT is due.
Net profit is the margin minus VAT. On a £300 margin with £50 VAT, your net profit is £250.
Two conditions have to hold before an item can go on the Margin Scheme. It has to fall inside one of the scheme categories, meaning second-hand goods, works of art, antiques, or collectors' items. You must also have been charged no VAT when you bought it.
Those categories are not the whole test. Precious metals, investment gold, and precious stones are excluded from the scheme, so an item can be second-hand and still fall outside it.
On the second condition, it is the purchase invoice that settles matters, not the seller's VAT status. Private individuals, estate sales, and other unregistered sources supply most scheme stock, but buying from a VAT-registered seller does not rule the scheme out on its own: where that dealer sold to you under the Margin Scheme themselves, no VAT was charged and the item can still go on the scheme. It is a VAT invoice showing VAT charged on the goods that moves the item onto standard VAT accounting: you charge VAT on the full selling price, and any input VAT on the purchase is recoverable only under the normal input-tax rules.
Most dealers use both methods. Tracking which items qualify for which treatment is one of the trickiest parts of margin scheme compliance.
Read the full eligibility rules on gov.ukQuick answers about how the UK VAT Margin Scheme works for second-hand goods, works of art, antiques and collectors' items.
VAT is calculated at 1/6 (16.67%) of the profit margin — the difference between the purchase price and the selling price — rather than on the full selling price. If you buy an item for £500 and sell it for £800, you pay VAT on the £300 margin, which works out at £50.
The effective rate is 16.67% (i.e. 1/6) of the margin. This is the VAT-inclusive rate applied to the profit, not 20% of the full sale. Because the margin already contains the VAT, dividing it by 6 extracts the VAT element.
No. If you account for an item under the Margin Scheme, you cannot reclaim input VAT on its purchase. The trade-off is that you only pay output VAT on the margin, not on the full sale price.
No VAT is due on a loss-making sale. The margin is zero or negative, so 1/6 of the margin is zero. You still need to record the sale in your stock book — HMRC expects loss-making margin scheme sales to appear in your records alongside profitable ones.
Only if that dealer also sold to you under the Margin Scheme (so you weren't charged VAT). If they charged you VAT under standard accounting, you must account for the resale under standard VAT, not the Margin Scheme.
Yes. HMRC requires a stock book recording each eligible item's purchase price, selling price, dates, supplier and buyer details, and margin calculation. Records must be kept for at least 6 years.
Not for your whole business — the treatment is settled item by item, on what the piece is and on whether VAT was charged when you bought it. You can have both kinds of items in your stock simultaneously. GemJam holds the VAT treatment you record against each purchase and applies it when that item sells.
The full guide to the Margin Scheme for jewellery and antique dealers — eligibility, stock book requirements, and worked examples.
Read the guideYou record the VAT treatment against each purchase; GemJam works out the margin scheme VAT when the item sells and produces HMRC-compliant stock books and VAT returns from the same records.
See the softwareStop calculating VAT manually. GemJam holds the VAT treatment you record against each purchase and works out the margin scheme VAT when an item sells. Your VAT report is generated from the same records. Join the waiting list for early access.