When does the margin scheme apply? A check

When does the margin scheme apply? To eligible second-hand goods that you were not charged VAT on when you bought them, sold with the records the scheme requires (official guidance). Miss a condition and VAT is due on the full selling price of that item instead. The VAT margin scheme guide explains how the scheme works; this post turns its conditions into a check a shop can run on each phone, tablet, laptop or console as it arrives.

The checklist

• The item is second-hand goods. "Goods that can still be used, or which could be used after repair" (official guidance).
• You were not charged VAT when you bought it. A margin scheme cannot be used for "any item you bought for which you were charged VAT" (official guidance).
• Repairs and parts stay out of the margin. Business overheads, repairs, parts and accessories cannot be included in the calculation (official guidance).
• It is in your stockbook, on its own line. A stockbook that tracks each item individually, with copies of the purchase and sales invoices (official guidance).
• The sales invoice shows no VAT. The total price, with no VAT shown separately (official guidance).

You do not have to register to use the scheme: you start by keeping the correct records and reporting it on your VAT return (official guidance).

Can I claim VAT back on a margin scheme item?

Not on the item itself: you were not charged VAT on it, which is why it qualifies. The VAT you pay on repairs, parts and overheads is reclaimed on your VAT return in the normal way (official guidance).

What happens if a condition is not met

You pay VAT on the full selling price of each item that does not meet all of the scheme's requirements (official guidance). On a used phone sold for £240 that is £40.00 instead of the £10.00 the scheme would have charged on a £60 margin. The full workings are in how to calculate margin scheme VAT, and the margin calculator runs your own figures.

On the VAT return

Margin scheme sales go on your VAT return: box 1 includes the output tax due on eligible goods sold, box 6 the full selling price less the VAT due on the margin, and box 7 the full purchase price of eligible goods bought. Margin scheme purchases and sales do not go in boxes 8 and 9 (official guidance).

Recording the decision when the item arrives

Whether a device qualifies is settled by how it was bought, so the moment to record it is when it comes in, not at the quarter end when nobody remembers which laptop came from the public and which from a supplier. The invoice side of the same decision is in what a margin scheme VAT invoice must show, and the wider picture in VAT on second hand goods.

Where SlickCell fits

Second-hand stock can be taxed on the margin between what you paid for that unit and what you sold it for, reported separately from standard-rated sales. Because every device carries its own purchase cost, the per-item record the margin scheme asks for is already there. See how used-device stock is costed per unit.

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General information, not tax advice. Check the published guidance or speak to your accountant. Rules on this page were checked against the published guidance on 25 September 2026.