You normally pay VAT on the full sales price of goods, but for second-hand goods like cars, or antiques, it's calculated on profit. This is referred to as the Gross Margin.

Follow the steps below in conjunction with VAT Notice 718. Obtain a copy of this notice to support the rules for recording your stock.

If you sell Margin Scheme goods at a loss, you can't offset the loss against profit from other goods.

 TIP: Run and print the Output Tax reports before you run your Year End routine in Sage 50 Accounts. The Year End process removes the information required for the reports.

For example: 

• Be registered for VAT
• The purchase invoice for the goods must not be a VAT invoice, and mustn't show VAT separately
• Don't issue an invoice for the sale of the goods which shows VAT separately
• Meet the record-keeping, accounting, and invoicing requirements set out in VAT Notice 718

These steps are in addition to the VAT Notice 718, and is a guide to calculating your VAT liability when using Sage 50 Accounts. If you need to clarify any special circumstances, contact HMRC.

The Sage VAT Return can't automatically calculate your output VAT for you, therefore, to calculate your VAT liability, you must:

• Set up the company on Standard VAT to calculate VAT not covered under the scheme
• Use the Output tax reports to calculate VAT under the VAT Margin scheme
• Adjust the figures calculated on the standard VAT Return using the figures on the Output tax reports

Transactions not covered by the VAT Margin scheme

The VAT Margin scheme doesn't include the following items, therefore you can reclaim VAT in the usual way:

• Repairs
• Spare Parts
• Accessories
• Business overheads
• Vehicles purchased then dismantled for spares or scrap

For further information about items not included in the VAT Margin scheme, refer to VAT Notice 718.

Record any transactions for these items in the usual way. For example, a supplier invoice or bank payment using the relevant tax code.

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