How does the VAT margin scheme work for second-hand goods?

The margin scheme suits your side business nicely. Instead of charging VAT on the full selling price, you pay VAT only on your margin — the difference between what you paid for the item and what you sold it for — at 16.67%, which is one-sixth. So if you buy a refurbished camera for £300 and sell it for £450, your margin is £150 and the VAT due is £25. Under normal accounting you'd owe far more on the full £450 selling price. The key qualification rule: you can only use the scheme for goods on which you were not charged VAT when you bought them. Buying from private individuals or non-VAT-registered sellers qualifies; buying from a VAT-registered supplier who charged you VAT doesn't — and you can't reclaim input VAT on margin-scheme purchases either. You don't need to register to use the scheme — you start simply by keeping the required records, including a stock book showing each item's purchase and sale details, and you report the VAT on your normal return. One caution: if you don't meet all the scheme's conditions, VAT becomes due on the full selling price. And for high-volume, low-value items, the simplified Global Accounting version may be easier than accounting item by item.