Art Dealers and the VAT Margin Scheme

The VAT Margin Scheme is available for use by VAT-registered businesses who buy and sell second-hand goods, works of art and other collectables. Provided certain conditions are met, the seller of such goods need charge (and pay to HMRC) VAT only on the difference between the purchase or acquisition cost of the work in question and the price for which it is sold.

This scheme is extremely useful and can result in higher profits for the business than using the normal VAT method of calculation. The scheme in broad terms applies where a business buys an item from a non VAT-registered business or individual (or a VAT-registered business which sells it under the scheme) and then sells it, normally also, to another non VAT-registered business or individual.

There are a number of conditions, principally:

  1. The requirement to keep a detailed purchase invoice from the person from whom the item is bought containing certain minimum information.

  2. The requirement for the dealer’s own invoice to include certain minimum information including a phrase that confirms that the item is being sold under the Margin Scheme.
  3. The need to keep a stockbook.

The use and peculiarities of this scheme gives rise to more queries from Art dealers than anything else,  especially when buying from or selling to or in other countries or at exhibitions, etc.

The best approach is to ensure that advice is taken from Professional arts accountants and advisers like Westbury who  specialise in advising the Art sector, for more information or to get in touch, visit our contact us page.