Purpose-Built for UK Dealers
VAT Margin Scheme software that handles the calculations, tracks eligibility, and generates HMRC-compliant reports automatically. Built by a former UK dealer of jewellery, watches, antiques, and luxury goods who spent years wrestling with spreadsheets.
VAT Return Report
Q1 2026 · 1 Jan 2026 – 31 Mar 2026
£4,216.50
VAT due on sales
£1,840.00
VAT reclaimed
£2,376.50
To pay HMRC
MTD Box Values
The VAT Margin Scheme is an HMRC-approved method for VAT-registered dealers of second-hand goods, works of art, antiques, and collectors' items. Instead of charging VAT on the full selling price, dealers pay VAT only on the profit margin: the difference between what they paid for an item and what they sold it for. An item has to belong to one of those categories and to have been bought with no VAT charged. Precious metals, investment gold, and precious stones are excluded from the scheme.
For UK dealers of jewellery, watches, antiques, and luxury goods, the Margin Scheme is essential. Most stock is purchased from private individuals, estate sales, or other non-VAT-registered sources. Without the Margin Scheme, you would owe VAT on the entire selling price with no input VAT to reclaim, wiping out your profit on lower-margin items.
The catch: HMRC requires meticulous record-keeping. Every eligible purchase needs a Stock Book entry with the date, description, purchase price, and seller details. Every sale needs a corresponding record. And you must track which items qualify for the Margin Scheme and which must use standard VAT accounting, because not every purchase is eligible.
This is where most dealers struggle. A spreadsheet will track the numbers, but nothing in it stops a later edit from quietly contradicting the treatment you recorded at purchase, and nothing records who changed a figure or when.
The margin scheme calculation is straightforward in principle but error-prone in practice, especially when tracking hundreds of items across different VAT treatments.
Note the price you paid, then check the purchase against the eligibility conditions: the item counts as second-hand goods, a work of art, an antique, or a collectors' item, and you were charged no VAT on the purchase. Buying from a private seller usually means the VAT condition holds, though the purchase invoice is what settles it.
When the item sells, record the full selling price. The margin is the selling price minus the purchase price.
VAT is calculated at 1/6 (16.67%) of the positive margin. For example: buy at £500, sell at £800: the margin is £300 and the VAT due is £50. If the margin is zero or negative, no VAT is due.
Include the total output VAT from margin scheme sales in Box 1 of your VAT return. The full selling prices go in Box 6. Keep the Stock Book records for HMRC inspection.
Important: You must not show VAT separately on margin scheme invoices.
Customer-facing invoices must show only the total price. The VAT element is not disclosed. This is a common compliance error that GemJam handles automatically by generating dual invoice formats: one for customers and one for your records.
Most UK dealers start with spreadsheets. They work at first — until they don't.
A spreadsheet cannot keep a purchase tied to the treatment you recorded, or raise the question when the paperwork leaves it open. One incorrect entry means the wrong VAT treatment on that item, and you might not notice until an HMRC inspection.
A broken formula in row 47 silently corrupts every calculation below it. Margin scheme calculations require perfect accuracy across hundreds of items. One mistake cascades through your entire VAT return.
HMRC expects a clear, traceable record from purchase to sale. Spreadsheets let anyone edit any cell at any time with no history. If HMRC queries a figure, you cannot prove when or how it was entered.
Margin scheme invoices have specific rules: you must not show VAT separately. Spreadsheets cannot generate compliant invoices, so you end up creating them manually and hoping you remember the rules each time.
Every feature designed around the specific needs of UK dealers using the Margin Scheme.
Record the purchase and sale. GemJam calculates the margin and applies VAT at 1/6 (16.67%) automatically. No formulas to maintain, no manual calculation errors.
Set the VAT treatment as you record a purchase. Where the supplier record cannot settle it, GemJam asks you to choose before the purchase saves, then carries your answer through to the sale, the invoice, and the VAT return.
Generate your VAT Return Report with output VAT split between margin scheme and standard transactions. Export the Stock Book and registers your accountant needs — or export to Xero-compatible format, ready for forwarding to Dext.
GemJam automatically generates customer-facing invoices (no VAT shown, as required) and accounting invoices (with full margin and VAT breakdown) for your records.
Record your purchases and sales. GemJam handles the rest in the background: your stock book, export register, and VAT return are always up to date without a quarterly scramble.
PUR-2026-0042
Hatton Garden Estates · 15 Feb 2026
Subtotal
£8,250.00
VAT
£0.00
Margin Scheme
Total
£8,250.00
Line Items
Art Deco Diamond Ring, c.1925
JWL-2026-0089
£3,450.00
AvailableVictorian Pearl Brooch
JWL-2026-0090
£1,800.00
SoldCartier Tank Watch, 1970s
WCH-2026-0034
£3,000.00
AvailableHow purpose-built software compares to generic tools for margin scheme compliance.
| Feature | GemJam | Spreadsheets | Airtable + Zapier | Generic Inventory | Dedicated Dealer Software |
|---|---|---|---|---|---|
| Automatic margin VAT calculation | Yes | Manual formulas | Custom build needed | No | Yes |
| Purchase eligibility tracking | Yes | No | Custom build needed | No | Yes |
| HMRC-compliant Stock Book | Yes | Manual setup | Custom build needed | No | Yes |
| Dual invoice formats | Yes | No | No | No | Varies |
| VAT Return Report | Yes | Manual calculation | Custom build needed | No | Yes |
| Unique item management | Yes | Limited | Yes | Bulk-focused | Yes |
| E-commerce integrations (Shopify; eBay coming soon) | Yes | No | Via Zapier (extra cost) | Varies | No |
| Accounting export (Xero/Dext format) | Yes | No | Via Zapier (extra cost) | Varies | Limited |
You could commission a bespoke system tailored to your exact workflow. A build like that is a serious commitment of development time and budget, before the ongoing cost of hosting, updates, and bug fixes. You would also need to specify every margin scheme rule yourself, then keep it current as HMRC requirements change.
GemJam is purpose-built VAT Margin Scheme software, with updates included, available at launch.
New to the margin scheme? Read our complete guide to the VAT Margin Scheme for jewellery and antique dealers — covering eligibility, worked examples, and record-keeping requirements.
Selling second-hand goods through Shopify? Our step-by-step guide explains how to handle the VAT Margin Scheme on Shopify — including common pitfalls and how GemJam automates the process.
Looking for a tool built around your trade? See our jewellery dealer software, antique dealer software, watch dealer software, and designer handbag dealer software pages, each with the VAT Margin Scheme built in.
Practical answers for UK dealers using or considering the Margin Scheme.
The VAT Margin Scheme is an HMRC-approved method that lets a VAT-registered dealer pay VAT on the profit margin of an eligible item rather than on its full selling price. Two conditions have to hold before an item can go on the 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 not have been charged VAT when you bought it, which is why private individuals, house clearances, and other unregistered sources supply most scheme stock. Buy a ring from a private individual for £500, sell it for £800, and VAT falls on the £300 margin rather than the £800. Precious metals, investment gold, and precious stones are excluded from the scheme.
Yes. GemJam generates the Stock Book, Export Register, and purchase and sale records that HMRC requires for margin scheme dealers — including dates, descriptions, purchase prices, selling prices, and the 16.67% profit margin VAT calculation. The VAT Return Report provides output VAT figures ready for your Making Tax Digital submission. GemJam was built by a former UK dealer who understands the specific record-keeping requirements.
Yes. Every purchase carries its own VAT treatment and you set it as the purchase goes in. If the supplier record does not settle it, GemJam explains what that record does and does not tell you, then asks you to confirm the treatment before the purchase saves. Only your paperwork shows whether VAT was actually charged on the goods. Each item is then held to what you recorded: margin scheme sales are worked out at 1/6 (16.67%) of the margin, standard VAT sales on the full selling price, and the VAT Return Report keeps the two apart.
Yes. Import from Shopify, upload a spreadsheet, or add items one by one. Each piece becomes its own record with photos, provenance details, and purchase information. The import itself takes minutes. Backfilling opening stock for the margin scheme takes as long as your existing purchase records need.
GemJam generates a VAT Return Report with output VAT figures broken down by margin scheme and standard VAT transactions. You also get a full Stock Book, purchase and sale registers, and profit reports by period. Reports can be exported in Xero-compatible format, ready for forwarding to Dext for automated processing.
Generic inventory systems are built for warehouses and retail — they assume interchangeable units with fixed prices. Even dedicated dealer software typically pushes items only to its own website, not to the platforms where buyers actually are. GemJam is purpose-built for dealers of unique items: every piece gets its own purchase price, provenance, and margin. It handles VAT Margin Scheme calculations natively, pushes listings to Shopify (eBay coming soon), tracks individual item profitability, and generates HMRC-compliant documentation.
GemJam handles the calculations, tracks eligibility, and generates HMRC-compliant reports. Join the waiting list for early access.