The Schemes

In most cases goods sold by traders are newly manufactured or made. Where second-hand goods are sold back to businesses by non-VAT registered persons (usually private persons) special provisions apply to reflect the fact businesses are not able to recover VAT on those purchases.

Where the margin scheme applies VAT applies to the difference between the purchase and sale price i.e. the margin. The margin includes VAT. The scheme is optional.

Margin schemes and equivalent provisions apply so that VAT does not apply a second time when goods are sold back to trade and resold again.Without the scheme VAT would have to be charged on the full price without the benefit of a deduction on the purchase price, because the purchase may be from a private / non VAT registered person or other person who could not recover VAT (e.g. because of the limitation on VAT reclaims (e.g. used cars) .

Margin Scheme Goods

The principal category of margin scheme goods are second-hand goods. Second-hand goods are movable goods which are suitable for further use either as they are or after repair. They include second-hand cars. Works of art, collectors items, antiques, precious metals and precious stones are not defined as second-hand goods but are also margin scheme goods.

Margin scheme goods are those supplied to a VAT registered business (and certain non-VAT registered businesses) by a person/entity not entitled to deduct VAT in relation to the purchase, importation or acquisition from another EU state. The person/ entity concerned is generally not registered for VAT such as a private person.

Where the person or entity which acquired the goods is VAT registered (but not entitled to deduction) they must not have acquired them from a business which applied the margin scheme when they purchased or acquired under the scheme

Operation of Scheme

The profit margin on which VAT is based is deemed to be the sale price inclusive of VAT less the purchase price for those goods. Where there is a loss it is deemed deemed to be nil.

The scheme is optional. A dealer may opt to include most works of art, collectors items and antiques. Conditions apply to the exercise of the option. Individual transactions may be excluded from the option subject to conditions.

There is no right to deduct VAT in relation to goods subject to the margin scheme.

Standard rate (23%) VAT rate applies to certain categories of goods under the scheme even though a lower rate would apply if they were supplied as new goods. A standard VAT invoice must not be issued. VAT must not be shown separately. It must indicate that it is a margin scheme sale. This is not a VAT invoice. The purchaser cannot reclaim VAT on the purchase.

Where a VAT registered business acquires goods which were sold under the margin scheme and resells them, standard VAT applies even though the goods may be in a category for which input VAT could not have been recovered (principally cars). This does not apply where the goods were acquired other than as stock in trade of a business or by a driving school or where the goods were used for a VAT exempt business

In some cases, where goods are worth less than €635 it is not necessary to individually track the purchase and sale price. The dealer can opt to use a scheme by which the aggregate margin for all goods in the period can be used to calculate the value added tax.

Cross Border

The margin scheme does not apply to imported goods, save in limited circumstances in which it may be extended to art collectors items and antiques. Any export outside the EU is subject to zero rate VAT.

An intra-Community supply to a VAT registered business in another EU state is normally zero rated. The purchaser would self account for VAT as an intra-EU acquisition. However this position does not apply to margin scheme goods. The margin scheme applies and Irish VAT is charged on the margin.

Zero rating applies only to margin scheme goods which would be zero rated if supplied in the State. The VAT registered purchaser should itself be able to use its domestic margin scheme.Sales of margin scheme goods B2C in another EU state may be subject to the domestic margin scheme in that state.

The Finance Act 2015 provides that the margin scheme for secondhand goods may not be applied to cross-border supplies of new means of transport within the European Union.

Auctioned Goods

There is a margin scheme in relation to the sale of goods by public auction. An auctioneer in this context is a person who sells movable goods in the course of business on behalf of another by auction in return for a commission. The auctioneer’s margin is the difference between the total amount including taxes commissions and costs payable by the purchaser and the amount payable to the owner of the goods.

Auction scheme goods are works of art, collectors items, antiques or second-hand goods sold at auction where the principal/owner of the goods is not entitled to deduct tax in respect of his purchase, import or intra-EU acquisition. There are conditions and restrictions. It is not available to certain categories of principals /goods owners. The margin is inclusive of VAT and VAT is calculated accordingly.

The auctioneer must issue special invoices to the purchaser and the principal/seller in respect of its commission. They are not VAT invoices and VAT deduction is not available to the buyer.

Where the principal is VAT registered the sale may be subject to VAT, in which event a VAT invoice must issue. Similar provisions apply in relation to imports and intra- EU sales and purchases as apply in respect of second-hand goods.

Retail and Travel

There is a special scheme for retailers who make supplies at various rates. Where there is an electronic point of sale systems, VAT can easily be allocated. However without such a system,(small retailers) the calculation would be impractical. This scheme allows an apportionment of VAT on the basis of the percentage turnover liable at the relevant rates. This removes the need to identify the VAT rate on each individual item.

The supply of goods by a hire purchase company is not subject to VAT. This is because financial services are exempt. VAT on the supply of leasing transactions are a supply subject to VAT.

There is a margin scheme for travel agents and tour operators. VAT is charged on the difference between the sales price and the price of services purchased for the benefit of the customer.


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Draft Articles; The articles on this website are in draft form and are subject to further review for typographical errors and, in some cases, updating and correction. It is intended to include references to the sources of materials and acknowledgements in the final version. The content of articles with [EU] in the title and some of the articles in the section on Agriculture are a reproduction of or are based on European or Irish public sector information.

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