Antique Furniture and the VAT Margin Scheme Explained
If you buy and sell antiques or second-hand furniture, the VAT margin scheme can significantly reduce your VAT bill. Instead of paying 20% on the full selling price, you pay VAT only on the profit margin. Here is how it works and when you can use it.
What Is the VAT Margin Scheme?
The margin scheme is a special VAT treatment for second-hand goods, antiques, works of art, and collectors' items. Rather than calculating VAT on the full sale price, VAT is calculated only on the difference between what you paid and what you sold the item for.
The formula is: VAT = 1/6 × (Selling price − Purchase price)
This is equivalent to 20% of the margin, expressed as a fraction of the margin-inclusive price (margin × 20 ÷ 120).
When Can You Use It?
You can use the margin scheme when you bought the item without VAT — typically from a private seller, an auction house, or another dealer who also sold it under the margin scheme.
You cannot use the margin scheme if you were charged VAT on the purchase and reclaimed it as input tax. In that case, standard VAT at 20% applies on the full selling price.
Worked Example
| Amount | |
|---|---|
| Purchase price (antique chair) | £1,000 |
| Selling price | £1,500 |
| Margin | £500 |
| VAT due (1/6 of £500) | £83.33 |
| Standard VAT (20% of £1,500) would have been | £300.00 |
| VAT saving | £216.67 |
The margin calculation uses only the original purchase price — you cannot deduct restoration costs, delivery, or overheads.
How to Invoice Under the Margin Scheme
Do not show the VAT amount separately on the customer invoice. The total they pay includes the VAT within it. The invoice must state:
"Margin Scheme — Works of Art, Collectors' Items, Antiques."
If you show VAT as a separate line, you lose the ability to use the margin scheme on that sale and standard VAT becomes due on the full price.
Record Keeping Requirements
You must maintain a stock book that links every purchase to its eventual sale. For each item record: stock reference number, purchase date and price, supplier name and address, sale date and price, and buyer name and address.
HMRC can request this in an inspection. Without it, you risk losing the margin scheme treatment and facing a retrospective 20% VAT assessment on full selling prices.
Frequently Asked Questions
Q: Can I use the margin scheme on antiques I export abroad? A: No — exported goods are zero-rated at 0% regardless. The margin scheme only applies to UK sales. For exports, use the standard zero-rated export treatment and keep proof of export.
Q: What if I renovate the antique before selling — can I add renovation costs to the purchase price? A: No. The margin is strictly selling price minus original purchase price. You cannot add restoration, cleaning, or delivery costs to reduce your margin for VAT purposes, even if those costs were significant.
Q: Can any VAT-registered business use the margin scheme? A: Any VAT-registered dealer buying and reselling eligible second-hand goods can use it, provided the eligibility conditions are met on each item. You do not need to apply it to every item — you can use it selectively where it applies.
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