This notice is about the Auctioneers’ Scheme, which is a variation on the VAT Margin Scheme for second-hand goods, antiques, works of art and collectors’ items. It tells you when you may use the Auctioneers’ Scheme to account for VAT on the supplies you make.
It explains:
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This notice assumes that you have a working knowledge of basic VAT principles, as outlined in Notice 700: the VAT Guide.
If, after reading this notice, you need any further help or advice, contact our VAT Helpline.
The information in this notice used to be contained in Notice 718: Margin Schemes for second-hand goods, works of art, antiques and collectors’ items. We have moved the information which is relevant to auctioneers who opt to use the Auctioneers’ Scheme into this separate, shorter notice.
The rules about declarations on Auctioneers’ Scheme invoices have changed, see section 4 for details.
We’ve updated the notice to reflect the VAT rate of 20%.
You should read this notice if you’re an auctioneer and you want to know about the Auctioneers’ Scheme.
In UK law, Section 50A of the VAT Act 1994 allows the Treasury to make Orders to introduce second-hand schemes.
The VAT (Cars) Order 1992 covers cars.
The VAT (Special Provisions) Order 1995 (as amended) covers all goods other than cars.
Parts of this notice have the force of law under the orders. Paragraphs which have the force of law are indicated by a statement.
If you invoice in your own name and sell goods which would be eligible for sale under the Margin Scheme, there are several options you can choose from to account for VAT on your sales.
You may:
You do not have to apply the same option to all your sales. This notice is about the Auctioneers’ Scheme. Notice 718: the Margin Scheme and global accounting has more about using the standard margin scheme, and for more general information about margin schemes.
The Auctioneers’ Scheme is a variation on the standard margin scheme for second-hand goods, works of art, antiques and collectors’ items. It allows you to account for VAT on a margin which is equal to the value of the services you’ve supplied to the seller and the buyer.
Using a margin scheme means that you do not have to account for VAT on the hammer price of the goods.
When you calculate the margin under the scheme, you:
Section 3 provides full guidance on how to calculate the VAT due under the scheme.
You do not have to use any of the margin schemes as they’re optional.
If you do decide to use one, there are a number of conditions you must meet. If you cannot meet all the conditions, you cannot use the scheme.
The detailed conditions for using the Auctioneers’ Scheme are explained throughout this notice. The main ones are:
You must calculate the margin in accordance with the rules of the scheme. There are special rules about how to calculate your buying price, your selling price and your margin under the scheme. The margin you calculate under the scheme may not be the same as your profit margin.
You can use the scheme if the goods are eligible and the seller is one of the following:
This is a quick guide to the goods which are eligible to be sold under the margin schemes. If you are in any doubt, you should refer to section 20 at the end of Notice 718: the Margin Scheme and Global Accounting, where we have reproduced the law on eligible goods.
The legal definition of second-hand goods is goods which are suitable for further use as they are, or after repair. In most cases, goods which are second-hand in the ordinary usage of the term will be eligible for the margin schemes.
For the special rules about the legal definition of a second-hand motor vehicle, see Notice 718/1: the Margin Scheme on second-hand cars and other vehicles.
The legal definition of works of art includes pictures, paintings, collages and drawings executed by hand by the artist. Craft items and items produced in a technical or industrial context may not be eligible to be sold under the margin schemes. If you’re in any doubt, check the list at the end of Notice 718.
The legal definition of an antique is an item, other than a work of art or a collectors’ item, which is over 100 years old.
Not everything which somebody might collect will be included in the legal definition of a collectors’ item for margin scheme purposes. If you’re in any doubt, check the list at the end of Notice 718.
You must not use the scheme to account for sales of:
There is more information about these categories of goods at the end of Notice 718.
You can only use the scheme to account for sales of air guns if you are registered under the Firearms Act 1968.
You can use a margin scheme for some of your sales and the normal rules for others.
But, if you’ve sold an item under the normal VAT rules (that is, you charged VAT on the full selling price), you cannot go back and apply any of the margin schemes to that sale later.
If you sell an eligible item, but cannot meet all the record keeping, invoicing and accounting requirements, you cannot use either the Auctioneers’ Scheme or the standard margin scheme.
You’ll have to pay VAT on the hammer price as well as on your services to the vendor and the purchaser under the normal VAT rules for undisclosed agents. You can find further information about those rules in Notice 700: the VAT Guide.
It’s important to check with the seller whether the goods are eligible for inclusion in the Auctioneers’ Scheme before you auction them.
As explained in paragraph 2.2, you calculate your margin by taking into account charges for the services you make to the seller and the buyer.
When you’re calculating the amount of VAT due on an individual sale, you must work from the hammer price, as follows:
Your purchase price is the hammer price less any commission charges you make to the seller. You must not include any other services which you supply to the seller.
Your selling price is the hammer price plus any charges for services you make to the buyer. For example, buyer’s premium or other commission, or incidental expenses such as packing, transport and insurance costs.
To calculate your margin, you subtract the purchase price from the selling price.
To calculate the VAT on the sale, you multiply the margin by 1/6 (the VAT fraction).
Paragraph 3.2 explains which charges can be included in your scheme calculations.
There are detailed examples of calculations in section 8.
When you calculate your buying and selling prices under the Auctioneers’ Scheme, you must always include:
You must not include:
For more information about insurance provided by a third party, see Notice 718.
You must make sure that:
If you’ve made any charges which are not included in your scheme calculations, you must:
If you’re acting in your own name, the goods you sell are deemed, for VAT purposes, to be both a supply to you and a supply from you.
Because these 2 supplies happen at the same time, they share a common tax point. This is determined by reference to the actual sale of the goods at auction. The tax point for both supplies will be the earlier of you:
Under the Auctioneers’ Scheme, a margin is created from the supply of services made to the seller and the buyer. These services are not separately charged with VAT.
If you sell zero-rated goods, for example antique books, your margin will also be zero-rated.
In the VAT due column of your stock record, you should insert ‘nil’.
Sales made from Great Britain to EU member states are exports. Further information is available in notice 703.
Sales made under the Auctioneers’ Scheme from Northern Ireland to EU member states are treated in the same way as sales within the UK. The sales are liable to VAT in the UK.
For businesses selling from Northern Ireland the goods will not be subject to acquisition VAT when they are taken into an EU member state, so you should not include them on:
See Notice 718 for more detailed information for businesses which use margin schemes about buying and selling to or from the EU.
You will be making a combined supply of goods and services, with VAT due on the profit margin, if you:
The liability of your services will follow that of the goods, with the result that the whole supply will be zero-rated. However, you must obtain proof of export, as described in Notice 703, when you apply zero rating to the margin.
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If you sell the exported goods under the Margin Scheme, the liability of your services will not follow that of the goods because your services are charged and invoiced outside the scheme.
You’ll be able to sell the goods at the zero rate outside the scheme if you can meet the conditions in Notice 703, but your services will normally be standard-rated.
The retail export scheme allows certain overseas visitors to get a VAT refund on goods they buy and export from Northern Ireland in their personal luggage. You can use the retail export scheme together with the Auctioneers’ Scheme but, if you do, you must account for VAT on the sale until:
You can find more information about the retail export scheme in Notice 704: retail exports.
Notice 700/21: keeping VAT records gives guidance on the general records you must keep if you’re registered for VAT.
If you use the Auctioneers’ Scheme, there are some additional record keeping rules which apply to your stock record and invoices – paragraphs 4.2 to 4.8 give details.
These additional rules exist so that there’ll be a clear audit trail of the margin you have achieved on each item you’ve sold. It’s important that you keep to these rules so that you can continue using the Auctioneers’ Scheme. If we cannot check the margins you’ve declared from your records, VAT will be due on the full selling price of the goods you’ve supplied, even if they were otherwise eligible for the scheme.
If you’re not sure whether your records meet the Auctioneers’ Scheme rules, contact our Helpline.
This section, 4.2, has the force of law.
Although you must always keep stock records, you do not have to maintain a stock book which is strictly in accordance with the requirements set out in Notice 718.
However, if you do not maintain a stock book, you must retain sufficient alternative records which provide the information required in Notice 718.
Examples may include:
This section, 4.3, has the force of law.
When you sell an item under the scheme, you must issue an invoice to both the buyer and the seller.
You must issue the:
You must issue the seller with an invoice or statement which includes all these details:
If either the seller or the buyer is using a margin scheme, their respective selling and purchase prices must be clear from the invoices you issue. This means that you should allocate any charges included under the scheme against each separate lot.
In other words, if you’re selling several items on behalf of one seller, you must not put the total commission charged to that seller on the invoice for one of the items.
If the purchase invoice shows a separate VAT amount, the item is not eligible to be sold under the scheme.
You must issue the buyer with an invoice or other document which includes all these details:
To avoid causing the buyer confusion, you should issue separate invoices if you sell goods to the same buyer under both the Auctioneers’ Scheme and normal accounting. But you may include all those goods on the same invoice.
If you choose to do this, you must ensure that each supply can be clearly distinguished. The buyer must be able to establish the sales price for those items which were sold under the Auctioneers’ Scheme. This amount will form the purchase price for a VAT-registered dealer who’ll be selling the item on using a margin scheme.
If you’ve sold goods under the Auctioneers’ Scheme, and the buyer subsequently decides that they wish to treat the transaction outside the scheme, preferring to pay VAT separately on the hammer price and other charges, you may re-invoice for the transaction under the normal VAT rules.
You can re-invoice for the transaction under the normal VAT rules provided that you’re able to comply with all the relevant VAT regulations for the substitute transaction and, at the time of the amendment, both you and the buyer hold all the original records relating to the transaction.
If you can meet these conditions, and you’re willing to re-invoice, you must cancel the first entry in your records and cross-refer to the amended transaction.
The replacement invoice which you issue to the buyer must:
There’s a limit to how long after the due date of the VAT return on which you accounted for the original supply you may issue a replacement invoice. This is because the capping rules prevent input tax being claimed on invoices over a particular age. For up-to-date information about the capping time limits, see Notice 700/45: how to correct VAT errors and make adjustments or claims.
If you issue an invoice under the Auctioneers’ Scheme in a foreign currency, including the euro, you must show the sterling equivalent for each element of the supply. For example, the hammer price of the goods, the amount of commission, other charges due – and not just for the total value of the sale.
To convert amounts into foreign currencies you must use one of the methods outlined in Notice 700: the VAT Guide. Whichever method you adopt, you must use the exchange rate that’s current at the time you make the supply.
At the end of each tax period you’ll need to fill in a VAT return. Here are the special rules you must follow for any goods which you’ve bought or sold under a margin scheme during the tax period:
There’s no requirement to include margin scheme purchases or sales in boxes 8 and 9 of your VAT return.
Further guidance on how to fill in VAT returns is available in Notice 700/12: how to fill in and submit your VAT Return.
Generally, you must keep all your business records for VAT purposes for at least 6 years. If the 6 year rule causes you serious storage problems or undue expense, then you should consult our VAT Helpline. We may be able to allow you to keep some records for a shorter period.
You may use the Auctioneers’ Scheme to sell the goods on behalf of a pawnbroker if:
The 3-part form is a document which can be used to account for VAT on the sale of horses and ponies under the standard margin scheme. The 3-part forms come in numbered sets, with a VAT summary sheet at the back. They’re sold by the British Equestrian Trade Association.
When you sell a horse or pony on behalf of a person who is selling it under the standard margin scheme and is using the 3-part form, they’ll give you parts B (pink) and C (yellow) of the partially-completed form.
After the sale you should:
When you sell a horse or pony on behalf of a person who’s not registered for VAT to a person who is registered, you should complete your name, address and lot number on the reverse of part A (white) of the buyer’s form.
For more information about the special 3 part form for the sale of horses and ponies under the standard margin scheme, see Notice 718.
An Extra Statutory Class Concession, introduced with effect from 1 January 1999, allows the Auctioneers’ Scheme to be used for the sale of all goods grown, made or produced (including bloodstock or livestock reared from birth) by non-taxable persons.
As a condition of using the concession, you must obtain:
You may incorporate the certificate into your existing sales entry in agreement with our Helpline. See section 6 for an example of the certificate.
Auctioneers’ Scheme for second-hand goods, works of art, antiques and collectors items
Extra statutory concession number 3.27
Vendor’s Certificate for goods grown, made or produced and sold at auction on behalf of non-taxable persons.
I (full name)
………………………………
of (address)
………………………………………………………………………………………
………………………………………………………………………………………
………………………………………………………………………………………
declare that I am not registered or required to be registered for Value Added Tax and that the goods detailed below are to be sold at auction on my behalf by (auctioneer’s name).
Description of Goods
…………………………………………………………………………………………
Date of Sale (to be completed by auctioneer)
…………………………………………………………………………………………
Signature of vendor
…………………………………………………………………………………………
Signature of Auctioneer
…………………………………………………………………………………………
Date
…………………………………………………………………………………………
When you obtain goods which have had VAT charged on their full value, they’re not normally eligible for the Auctioneers’ Scheme.
But if you’re an auctioneer, and you act in your own name, you may opt to use the Auctioneers’ Scheme for works of art, antiques and collectors’ items which you’ve imported yourself (as principal on behalf of a third party) for onward sale in your own name, and works of art you have obtained (that is, which were supplied in the UK or acquired in Northern Ireland from an EU member state) from creators or their heirs, for onward sale in your own name, whether or not VAT was charged on their purchase or acquisition.
If you do not opt to use the Auctioneers’ Scheme or the Margin Scheme (see Notice 718), or you cannot meet the conditions described in paragraph 7.2, you must account for VAT in accordance with the general rules for auctioneers.
You can find details of import procedures and special arrangements for supplies of temporarily admitted goods in Notice 702: imports.
If you want to take up the Auctioneers’ Scheme option in any of these circumstances, you must meet the following conditions:
Works of art, antiques, and collectors’ items imported into Great Britain from outside the UK or into Northern Ireland from outside the EU qualify for a reduced rate of import VAT (currently 5%).
Such goods are often entered for relief under Temporary Admission (previously known as Temporary Importation) in order to be sold at auction.
Once the auction has taken place, the goods are:
If imported, the goods qualify for the reduced rate of VAT but the buyer’s premium does not. You may use the Auctioneers’ Scheme to account for sales of such items by auction, but you must charge VAT on the buyer’s premium at the appropriate rate.
If the goods are finally imported, or declared for entry to Customs Warehousing or Inward Processing Relief after the auction, you must charge VAT on the buyer’s premium at the standard rate.
If the goods are directly re-exported from Temporary Admission following the auction then you may charge VAT on the buyer’s premium at the zero rate.
When you opt to use the Auctioneers’ Scheme for imported works of art, antiques or collectors’ items on behalf of an overseas seller, the option will apply to imports at a reduced rate of 5%.
You must not reclaim the import VAT as input tax, or include it in your Auctioneers’ Scheme calculations.
You may, however, wish to recoup the amount from the seller outside the scheme.
You must calculate your purchase price in accordance with the rules in paragraph 3.1
When you opt to use the Auctioneers’ Scheme for works of art obtained from the creator or their heirs you must not reclaim any VAT charged by the supplier.
For businesses in Northern Ireland, If the work of art is an acquisition you should:
You must calculate your purchase price in accordance with the rules in paragraph 3.1.
The creator, or their heir, will have to account for output tax on the full hammer price, so they may ask you to sell the item under the option for the standard margin scheme (see Notice 718), rather than the Auctioneers’ Scheme.
If you account for the sale under the standard margin scheme, you must show VAT separately on any invoice or statement you issue for charges for your services. This is so that the seller will be able to reclaim the input tax on those charges.
Your purchase price under the standard margin scheme option will be the hammer price only.
We’ve included this section to help you understand the effect that different scenarios will have on the total VAT you would owe us for the same transaction.
In all of the examples:
You sell the item under the Auctioneers’ Scheme.
You charge commission to the seller.
You do not charge buyer’s premium or any other charges to the buyer.
Section Description Value (a) Hammer price £1,000 (b) Commission charged to seller:Commission rate times hammer price 12% × 1,000 £120 (c) Purchase priceHammer price less commission (a – b) 1,000 – 120 £880 (d) Selling Price = Hammer price (a) £1,000 (e) MarginSelling Price less purchase price (d – c) 1,000.00 – 880 £120 (f) VAT on saleMargin (e) times VAT fraction 120 × 1/6 £20
You sell the item under the Auctioneers’ Scheme.
You charge commission to the seller.
You charge buyer’s premium.
Section Description Value (a) Hammer price £1,000 (b) Commission charged to seller:Commission rate times hammer price 12% × 1,000 £120 (c) Purchase priceHammer price less commission (a – b) 1,000 – 120 £880 (d) Buyer’s premiumRate of buyer’s premium times hammer price 18% × 1,000 £180 (e) Selling PriceHammer price plus buyer’s premium (a + d) 1,000 + 180 £1,180 (f) MarginSelling Price less purchase price (e – c) 1,180.25 – 880 £300 (g) VAT on saleMargin (f) times VAT fraction 300 × 1/6 £50
You sell the item under the Auctioneers’ Scheme.
The item you are selling is for export outside the UK or, for businesses in Northern Ireland exported outside the EU.
You charge commission to the seller.
You charge buyer’s premium.
You must obtain proof of export before you can apply zero rating to the sale. See Notice 703: exports and removals of goods from the UK for more information.
Section Description Value (a) Hammer price £1,000 (b) Commission charged to sellerCommission rate times hammer price 12% × 1,000 £120 (c) Buyer’s premiumRate of buyer’s premium times hammer price 18% × 1,000 £180 (d) Purchase priceHammer price less commission (a – b) 1,000 – 120 £880 (e) Selling PriceHammer price plus buyer’s premium (a + c) 1,000 + 180 £1,180 (f) MarginSelling Price less purchase price (e – d) 1,180 – 880 £300 (g) VAT on saleZero-rated Nil
You sell the item under the Margin Scheme.
You charge commission to the seller.
You charge buyer’s premium.
Section Description Value (a) Hammer price £1,000 (b) Buyer’s premiumRate of buyer’s premium times hammer price 18% × 1,000 £180 (c) Purchase price (a) £1,000 (d) Selling price(Hammer price plus buyer’s premium, a + b) £1,180 (e) Margin(Selling price less purchase price, d – c) £180 (f) VAT on saleMargin (e) times VAT fraction 180 × 1/6 £30
If you sell the item under the Margin Scheme, you must charge commission to the seller on a separate invoice, and account for VAT on the full amount.
Using the figures from this example, the commission to the seller is £100. VAT at 20% on that amount gives a total charge for commission of £120.
The total VAT you declare to us on the sale of this item under the Margin Scheme will be the same as it would have been if you had used the Auctioneers’ Scheme in Example 2. (£30 + £20 = £50.)
If the vendor is VAT-registered, they’ll be able to reclaim the VAT on the separate commission invoice if you’ve used the Margin Scheme for the sale.
You sell the item under the Auctioneers’ Scheme option for imported works of art, antiques or collectors’ items.
The item is valued at import at £500. You pay import VAT at 5% on this value (£25).
You charge commission to the seller.
You charge buyer’s premium.
Section Description Value (a) Hammer price £1,000 (b) Buyer’s premiumRate of buyer’s premium times hammer price 18% × 1,000 £180 (c) Commission charged to sellerCommission rate times hammer price 12% × 1,000 £120 (d) Purchase price(Hammer price less commission, a – c) £880 (e) Selling price(Hammer price plus buyer’s premium, a + b) £1,180 (f) Margin(Selling price less purchase price, e – d) £300 (g) VAT on saleMargin (f) times VAT fraction 300 × 1/6 £50
You can recoup the £25 import VAT you had to pay when the item entered the UK from the seller in the USA, but you must not include it in your Auctioneers’ Scheme calculations.
You sell zero-rated goods (such as antique books) under the Auctioneers’ Scheme.
You charge commission to the seller.
You charge buyer’s premium.
Section Description Value (a) Hammer price £1,000 (b) Commission charged to seller (exclusive of VAT) £100 (c) Buyer’s premium (exclusive of VAT) £150 (d) Purchase priceHammer price less commission (a – b) 1,000 – 100 £900 (e) Selling PriceHammer price plus buyer’s premium (a + c) 1,000 + 150 £1,150 (f) MarginSelling Price less purchase price (e – d) 1,150 – 900 £250 (g) VAT on saleZero-rated Nil
Read Your Charter to find out what you can expect from HMRC and what we expect from you.
If you have any feedback about this notice email: customerexperience.indirecttaxes@hmrc.gsi.gov.uk.
You’ll need to include the full title of this notice. Do not include any personal or financial information like your VAT number.
If you need general help with this notice or have another VAT question you should phone our VAT helpline or make a VAT enquiry online.
If you’re unhappy with HMRC’s service, contact the person or office you’ve been dealing with and they’ll try to put things right.
If you’re still unhappy, find out how to complain to HMRC.
Find out how HMRC uses the information we hold about you.
Source: https://antiquewolrd.com
Categories: Antique News
This post was last modified on 12/10/2023 8:32 pm
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