Andrew Needham looks at what you can and cannot add to your purchase price or deduct from the sale proceeds when calculating the profit margin on second-hand goods.
If a business buys and sells second-hand goods, it can use one of the second-hand margin schemes so that VAT is only due on the profit margin, not the full selling price.
When using a second-hand scheme, there are a number of points that should be taken into account.
What is a margin scheme?
A second-hand margin scheme allows businesses to reduce the amount of VAT that would normally be due. When a business buys second-hand goods from a private individual, it does not charge VAT so there would be no input VAT to offset against the output tax that would be charged. The margin schemes allow the business to only account for VAT on the profit margin it achieves on the sale.
So,
