Margin schemes
Tertiary legislation about VAT margin schemes (including those for tour operators and second hand vehicles).
Notice made under The VAT (Special Provisions) Order 1995 and The VAT (Cars) Order 1992)
1. Force of law
In UK law, Section 50A of the VAT Act 1994 allows the Treasury to make Orders to introduce Margin Schemes.
Article 8(1) of the VAT (Cars) Order 1992 (SI 1992/3122 (as amended) (“the 1992 Order”)):
Subject to complying with such conditions (including the keeping of such records and accounts) as the Commissioners may direct in a notice published by them for the purposes of this Order or may otherwise direct, and subject to paragraph (3) below, where a person supplies a used motor car which he took possession of in any of the circumstances set out in paragraph (2) below, he may opt to account for the VAT chargeable on the supply on the profit margin on the supply instead of by reference to its value.
Article 12(1) of The VAT (Special Provisions) Order 1995 (SI 1995/1268) (as amended) (the “1995 Order”):
Without prejudice to article 13 below and subject to complying with such conditions as the Commissioners may direct in a notice published by them for the purposes of this Order or may otherwise direct and subject to paragraph (4) below, where a person supplies goods of a description in paragraph (2) below, of which he took possession in any of the circumstances set out in paragraph (3) below, he may opt to account for the VAT chargeable on the supply on the profit margin on the supply instead of by reference to its value.
Article 13(1) of The VAT (Special Provisions) Order 1995 (SI 1995/1268) (as amended) (the “1995 Order”):
Subject to complying with such conditions as the Commissioners may direct in a notice published by them for the purposes of this Order or may otherwise direct, and subject to paragraph (2) below, a taxable person who has opted under article 12(1) above may account for VAT on the total profit margin on goods supplied by him during a prescribed accounting period, calculated in accordance with paragraph (3) below, instead of the profit margin on each supply.
Use of the schemes is subject to compliance with those conditions or directions.
This notice sets out the conditions and directions having force of law under these articles.
2. Stock book
2.1 General requirements
The following has force of law under Article 8(1) of the 1992 Order and Article 12(1) of the 1995 Order
You must maintain a stock book in written or electronic form.
There is an exception to this requirement when using the Auctioneers scheme (see 2.6 below) and for occasional sales (see 8 below).
2.2 Detailed records
The following has force of law under Article 8(1) of the 1992 Order and Article 12(1) of the 1995 Order
Your stock book must contain the following information for items bought and sold under a Margin Scheme.
Purchases:
- Unique stock number (in numerical sequence)
- Date of purchase
- Purchase invoice number
- Name of seller
- Description of the item
- Purchase price
Sales:
- Date of sale
- Sales invoice number
- Name of buyer
- Description of the item
- Sales price, or method of disposal
- Margin achieved on sale
- VAT due on margin
There is an exception to this requirement when using the Auctioneers scheme (see 2.6 below).
2.3 Additional requirements for vehicles
The following has force of law under Article 8(1) of the 1992 Order and Article 12(1) of the 1995 Order
The stock book must also record the:
- the vehicle registration number (VRN) or if none, the Vehicle Identification Number (VIN).
- a description consisting of the make, model and colour)
2.4 Additional requirements for horses and ponies
The following has force of law under Article 12(1) of the 1995 Order
In addition to the general stock book requirements (see para 2.2 above), you must also include enough information in your stock book to identify the horse or pony, including:
- If the purchase price of the horse or pony is more than £500:
- unique identifying passport number or
- a vet must certify that the horse or pony is the one described on the invoice.
- colour
- sex
- type or breed, for example, cob or thoroughbred
- height
- distinctive markings
And where known:
- age
- stable name
2.5 BETA scheme for horses and ponies
The following has force of law under Article 12(1) of the 1995 Order
As an alternative to the margin scheme invoice requirements, you may use the British Equestrian Trade Association (BETA) form provided you complete it in full. You should use one form for each horse or pony you buy or sell.
2.6 Auctioneers scheme
The following has force of law under Article 8(1) of the 1992 Order and Article 12(1) of the 1995 Order
You must retain a stock book in keeping with para 2.1 and 2.2 above or retain sufficient alternative records which provides the information in para 2.2.
Examples of alternative records may include:
- entry forms
- sales catalogues
- copies of lots and sales of the day
- copies of sales and purchase invoices
3. Stock number
The following has force of law under Article 8(1) of the 1992 Order and Article 12(1) of the 1995 Order
Each purchase must be allocated a unique, sequential number: the stock number.
To ensure an audit trail is maintained, the stock number must be noted on the purchase and sales invoices.
4. Issue sales invoices containing specific information
The following has force of law under Article 8(1) of the 1992 Order and Article 12(1) of the 1995 Order
You must include the following information on sales invoices for all Margin Scheme sales.
- Your name, address and VAT registration number
- The buyer’s name and address
- Invoice number
- Date of sale
- Stock book number (see paragraph 3)
- Description of the item
- Total price – you must not show VAT separately
4.1 Special rules for the Auctioneers Scheme
The following has force of law under Article 8(1) of the 1992 Order and Article 12(1) of the 1995 Order
When you sell an item under the scheme, you must issue an invoice to both the buyer and the seller.
You must issue the:
- seller with an invoice or statement which includes all the details listed below
- buyer with an invoice or other document which includes all the details listed below
Purchase invoice or statement
You must issue the seller with an invoice or statement which includes the following details:
- seller’s name and address
- your name and address
- a means of cross-referencing between the sales system and the stock book, for example, the stock book number
- invoice number
- date of transaction
- a description of the item
- the price of the goods sold at auction
- any commission charges you made to the seller (you must not show a separate amount of VAT on these charges)
- the net amount due to the seller- this amount will form
- your purchase price
- the selling price for a seller who is VAT-registered and is using the Margin Scheme.
5. Issue self-billed invoices to suppliers, containing specific information
The following has force of law under Article 8(1) of the 1992 Order and Article 12(1) of the 1995 Order
If you’re buying from a private individual or an unregistered business, you must make out the purchase invoice yourself (a self-billed invoice).
When completing a self-billed invoice, you must include the following specific information.
- Seller’s name and address
- Your name, address and VAT registration number
- Invoice number
- Date of transaction
- Stock book number
- Description of the item(s)
- Total price paid – you must not add any other costs to this price
6. Global Accounting Scheme
The following has force of law under Article 13(1) of the 1995 Order
6.1 Sales invoice
You must include the following information on sales invoices for Global Accounting sales:
- Your name, address and VAT registration number
- The buyer’s name and address
- Invoice number
- Date of sale
- Description of goods (this must be sufficient to enable us to verify that the goods are eligible for global accounting, for example 4 tables, 10 chairs – ’assorted goods’ is not acceptable)
- Total price - you must not show VAT separately
6.2 Purchase invoice
If you’re buying from a private individual or an unregistered business, you must make out the purchase invoice yourself (a self-billed invoice).
When completing a self-billed invoice, you must include the following specific information.
- Seller’s name and address
- Your name, address and VAT registration number
- Invoice number
- Date of transaction
- Description of the item(s)
- Total price paid
6.3 Records
You must keep a record of all purchases and sales and calculations of how the global margin was calculated.
Global accounting records should be separate from any margin scheme records.
6.4 Goods lost through breakage, theft or destruction
If you lose any goods through breakage, theft or destruction, you must subtract their purchase price from your global accounting purchase record.
6.5 Use of global scheme for scrap vehicles.
You can include second-hand motor vehicles in the global margin scheme if you break them up and sell the parts on as scrap. However, the margin schemes can’t be used for the sale of parts valued at over £500.
6.6 Commencement of use of global scheme.
When you start using the global accounting scheme, you may include any eligible stock on hand.
You must be able to identify the:
- eligible stock
- purchase value
6.7 Cessation of use of global scheme.
In the final period you use the scheme, you must make a closing adjustment to take account of purchases for which you have taken credit, but which have not been sold.
7 Pawned Goods
The following has force of law under Article 8(1) of the 1992 Order and Article 12(1) of the 1995 Order
7.1 Additional conditions for pawned goods
In addition to the general conditions, you can only use a margin scheme if all of the following apply:
-
loan is for £75 or less
-
the loan period was for at least 6 months
7.2 Restoration of pledge
If the pledge is restored during the period of grace, then there will be no VAT due on the supply provided you:
- record the redemption in your pledge stock records
- stamp the ‘Credit Agreement and Pawn Receipt’ with the date of redemption and keep it for inspection
7.3 Purchase invoice for pawned goods
You can keep the credit agreement or pawn receipt as your purchase invoice, as long as:
- the contract number is entered in your pledge stock record and cross refers to the credit agreement
- a copy of the interest calculations and total purchase value for margin scheme purposes is attached, if it differs from the amount shown on the receipt.
8. Occasional Sales
The following has force of law under Article 8(1) of the 1992 Order and Article 12(1) of the 1995 Order
Businesses that make an occasional sale of eligible goods do not need to comply with the full record-keeping requirements.
You do not have to maintain a stock book for occasional sales, but you must retain the purchase and sales invoice with evidence of how the margin is calculated.
9. Sale or Return
The following has force of law under Article 8(1) of the 1992 Order and Article 12(1) and 13(1) of the 1995 Order
9.1 Goods transferred to you
For eligible goods transferred to you on a sale or return basis the following should be recorded in your records
- the date of transfer of the item
- description of the item
- the name and address of the dealer or person transferring the item to you
- the date of sale or return or date of adoption
9.2 Goods transferred from you
For eligible goods you transfer to another business on a sale or return basis you should keep a record of:
- the date of transfer from you on a sale or return basis of the item
- description of the item
- the name and address of the dealer or person you transferred the goods to
- the date of subsequent adoption by that person
The following content has force of law under S53(1) of VATA Arts 3 & 7 of The VAT (Tour Operators) Order 1987 (1987/1806) and was originally published in VAT Notice 709/5.
1. Market Value calculation (annual adjustment)
Only use this section if you have packages or parts of packages being apportioned by the market value of the in-house element of the package. On completion of all the steps M1-M5 you must then follow the steps in the cost-based calculation in section 2, taking forward the figures from this section as instructed.
1.1 Calculate the value of sales of Margin Scheme packages
| Step | |
|---|---|
| M1 | Total the VAT-inclusive selling prices of all your in-house and Margin Scheme packages supplied during the financial year including any that are not ‘market value’ packages. |
1.2 Working out the market value
| Step | |
|---|---|
| M2 | Total the VAT inclusive market value of the standard-rated in-house supplies at M1: carry forward this figure to step 21 of section 2 |
| M2.5 | Total the VAT inclusive market value of the reduced-rated in-house supplies at M1: carry forward this figure to step 21.5 of section 2 |
| M3 | Total the VAT inclusive market value of the zero-rated and outside the scope in-house travel services at M1: carry forward this figure to step 26 of section 2 |
| M4 | Total the VAT inclusive market value of the in-house supplies at step M2, M2.5 and M3 |
1.3 Working out selling value of Margin Scheme supplies and non-market value in-house supplies
| Step | |
|---|---|
| M5 | Deduct the total at step M4 from the total at step M1: carry forward this figure to step 1 of section 2 |
2. Cost-based calculation (annual adjustment)
This section applies to packages being apportioned by reference to the costs of the in-house element of the package, and imports the figures calculated by the market value method in section 1, where that method is used for all or some of the travel packages. Do not include values already entered in section 1 unless explicitly instructed.
2.1 Working out the total sales of Margin Scheme packages
| Step | |
|---|---|
| 1 | Bring forward the total calculated at step M5 of section 1. If section 1 is not used then enter the VAT-inclusive selling prices of your in-house and Margin Scheme packages supplied during the financial year. |
2.2 Working out the purchase prices of Margin Scheme supplies
| Step | |
|---|---|
| 2 | Total the VAT-inclusive purchase prices of the standard-rated Margin Scheme supplies to be enjoyed in the UK included in the total at step 1. |
| 3 | Total the VAT-inclusive purchase prices of the Margin Scheme supplies (to be enjoyed outside the UK) included in the total at step 1. |
2.3 Working out the direct costs of in-house supplies.
Steps 4 to 7 should not include costs relating to an in-house supply accounted for under section 1 (market value)
| Step | |
|---|---|
| 4 | Total the VAT-exclusive direct costs to you of the standard-rated in-house supplies included in step 1. Add a percentage of that amount equivalent to the standard rate of VAT. |
| 4.5 | Total the VAT-exclusive direct costs to you of the reduced-rated in-house supplies included in step 1. Add a percentage of that amount equivalent to the reduced rate of VAT. |
| 5 | Total the VAT-exclusive direct costs to you of the zero-rated in-house supplies included in step 1. |
| 6 | Total the VAT-inclusive direct costs to you of the exempt in-house supplies included in step 1. Deduct any input tax that you are entitled to recover on these costs. |
| 7 | Total the direct costs to you of the in-house supplies included in step 1 that are supplied outside the UK, exclusive of any VAT incurred on these costs that you are entitled to recover. |
2.4 Working out the ‘costs’ of agency supplies
| Step | |
|---|---|
| 8 | Total the VAT-inclusive amounts paid by you to your principals in respect of the agency supplies included in step 1 for which the consideration you receive is standard-rated. |
| 8.5 | Total the VAT-inclusive amounts paid by you to your principals in respect of the agency supplies included in step 1 for which the consideration you receive is reduced-rated. |
| 9 | Total the VAT-inclusive amounts paid by you to your principals in respect of the agency supplies included in step 1 not already accounted for in step 8 and 8.5. |
2.5 Working out the total margin
| Step | |
|---|---|
| 10 | Add the totals of costs at steps 2 to 9 inclusive |
| 11 | Calculate the total margin for all the supplies included in step 1 by deducting the total at step 10 from the total at step 1. |
2.6 Apportioning the margin
| Step | |
|---|---|
| 12 | Calculate the margin for the standard-rated Margin Scheme supplies to be enjoyed in the UK by applying the following formula: |
| total at step 2 ÷ by total at step 10 × total at step 11 | |
| 13 | Calculate the margin for the zero-rated Margin Scheme supplies to be enjoyed outside the UK by applying the following formula: |
| total at step 3 ÷ by total at step 10 × total at step 11 |
Steps 14 to 17 can be ignored where a market value is applied to all in-house supplies under section 1
| Step | |
|---|---|
| 14 | Calculate the margin for the standard-rated in-house supplies by applying the following formula: |
| total at step 4 ÷ by total at step 10 × total at step 11 | |
| 14.5 | Calculate the margin for the reduce rate in-house supplies by applying the following formula: |
| total at step 4.5 ÷ by total at step 10 × total at step 11 | |
| 15 | Calculate the margin for the zero-rated in-house supplies by applying the following formula: |
| total at step 5 ÷ by total at step 10 × total at step 11 | |
| 16 | Calculate the margin for the exempt in-house supplies by applying the following formula: |
| total at step 6 ÷ by total at step 10 × total at step 11 | |
| 17 | Calculate the margin for the in-house supplies made outside the UK by applying the following formula: |
| total at step 7 ÷ by total at step 10 × total at step 11 | |
| 18 | Calculate the consideration for the standard-rated agency supplies by applying the following formula: |
| total at step 8 ÷ by total at step 10 × total at step 11 | |
| 18.5 | Calculate the consideration for the reduced rate agency supplies by applying the following formula: |
| total at step 8.5 ÷ by total at step 10 × total at step 11 | |
| 19 | Calculate the consideration for the non-standard-rated agency supplies by applying the following formula: |
| total at step 9 ÷ by total at step 10 × total at step 11 |
2.7 Working out your output tax
| Step | |
|---|---|
| 20 | Calculate the output VAT due on the Margin Scheme supplies by applying the following formula: |
| total at step 12 × the VAT fraction | |
| 21 | Calculate the output VAT due on the standard-rated in-house supplies by applying the following formula: |
| total at step 4 + total at step 14 + total calculated at step M2 of section 1 × the VAT fraction | |
| 21.5 | Calculate the output VAT due on the reduce rate in-house supplies by applying the following formula: |
| total at step 4.5 + total at step 14.5 + total calculated at step M2.5 of section 1 × the VAT fraction | |
| 22 | Calculate the output VAT due on the standard-rated agency supplies by applying the following formula: |
| total at step 18 × the VAT fraction | |
| 22.5 | Calculate the output VAT due on the reduced rate agency supplies by applying the following formula: |
| total at step 18.5 × the VAT fraction |
2.8 Working out sales values
| Step | |
|---|---|
| 23 | Calculate the VAT-exclusive value of the standard-rated Margin Scheme supplies by deducting the total at step 20 from the total at step 12. |
| 24 | Note the value of the zero-rated Margin Scheme supplies at step 13 |
| 25 | Calculate the VAT-exclusive value of your standard-rated in-house supplies by applying the following formula: |
| total at step 4 + total at step 14 + total calculated at step M2 of section 1 - total at step 21 | |
| 25.5 | Calculate the VAT-exclusive value of your reduced rate in-house supplies by applying the following formula: |
| total at step 4.5 + total at step 14.5 + total calculated at step M2.5 of section 1 - total at step 21.5 | |
| 26 | Calculate the value of the zero-rated supplies made within the scheme by applying the following formula: |
| total at step 5 + total at step 15 + total calculated at step M3 of section 1 | |
| 27 | Calculate the value of your exempt in-house supplies made by applying the following formula: |
| total at step 6 + total at step 16 | |
| 28 | Calculate the value of your in-house supplies which are supplied outside the UK by applying the following formula: |
| total at step 7 + total at step 17 | |
| 29 | Calculate the total VAT exclusive value of the supplies: |
| total of steps 23 to 28. Include this total in box 6 of your VAT return. |
2.9 Working out the annual adjustment
| Step | |
|---|---|
| 30 | Calculate the total output VAT due on your Margin Scheme supplies by adding the totals at steps 20 to 22.5 inclusive. |
| 31 | Total the provisional output VAT which has been accounted for during the financial year on the supplies included in the total at step 1. |
| 32 | Deduct the total at step 31 from the total at step 30. Include the resulting total in box 1 of your VAT return, either as a payable amount where the amount is positive or as a deductible amount where the amount is negative. |
3. Accounting for VAT on the provisional value of Margin Scheme supplies
3.1 Working out the provisional percentage
| Step | |
|---|---|
| 1 | Calculate the VAT-inclusive amount of your standard-rated Margin Scheme supplies for the preceding financial year by adding the totals from steps 4, 4.5, 12, 12.5, 14, 14.5, 18 and 18.5 of section 9, together with the total M2 and M2.5 in the market value calculation in section 8. |
| 2 | Calculate the VAT-inclusive standard-rated percentage of the total selling price of all your Margin Scheme supplies for the preceding tax year by applying them one of following formulae: If you have used a market value to value in-house supplies total at step 1 of section 10 ÷ total at step M1 of section 8 × 100 If you have not used a market value to value in-house supplies total at step 1 of section 10 ÷ total at step 1 of section 9 × 100 |
3.2 Working out the VAT return figures
| Step | |
|---|---|
| 3 | Total the VAT-inclusive selling prices of the Margin Scheme supplies supplied during the prescribed accounting period. |
| 4 | Calculate the provisional VAT-inclusive amount of your standard-rated Margin Scheme supplies made during the prescribed accounting period by applying the following formula: |
| total at step 3 × percentage at step 2 | |
| 5 | Calculate the provisional amount of output VAT due for the prescribed accounting period by applying the following formula: |
| total at step 4 × the standard rate VAT fraction |
4. Simplified end-of-year calculation (annual adjustment)
| Step | |
|---|---|
| 1 | Total the VAT-inclusive selling prices of your Margin Scheme supplies supplied during the financial year. |
| 2 | Total the VAT-inclusive purchase prices of the Margin Scheme supplies included in the total at step 1. |
| 3 | Calculate the VAT-inclusive amount of the supplies included in step 1 by deducting the total at step 2 from the total at step 1. |
| 4 | Calculate the total output VAT due on your Margin Scheme supplies and Margin Scheme packages by applying the following formula: |
| total at step 3 × the standard rate VAT fraction. | |
| 5 | Calculate the VAT-exclusive value of your Margin Scheme supplies by deducting the total at step 4 from the total at step 3. |
| 6 | Total the provisional output VAT which has been accounted for during the financial year on the supplies included in the total at step 1. |
| 7 | Deduct the total at step 6 from the total at step 4. Include the resulting total in box 1 of your VAT return, either as a payable amount where the amount is positive or as a deductible amount where the amount is negative. |
5. Accounting for VAT on the provisional value of Margin Scheme supplies when the simplified calculation applies (all supplies standard-rated)
| Step | |
|---|---|
| 1 | Calculate the VAT-inclusive standard-rated percentage of the total selling price of all your Margin Scheme supplies and Margin Scheme packages for the preceding tax year by applying the following formula: |
| total at step 3 of section 4 × 100 ÷ total at step 1 of section 4 | |
| 2 | Total the VAT-inclusive selling prices of all of your Margin Scheme supplies and Margin Scheme packages supplied during the prescribed accounting period. |
| 3 | Calculate the provisional VAT-inclusive amount of your standard-rated supplies of Margin Scheme supplies and Margin Scheme packages made during the prescribed accounting period by applying the following formula |
| total at step 2 × percentage at step 1 | |
| 4 | Calculate the provisional amount of output VAT due for the prescribed accounting period by applying the following formula: |
| total at step 3 × the standard rated VAT fraction | |
| 5 | Calculate the provisional VAT-exclusive value of all of your Margin Scheme supplies and Margin Scheme packages made during the prescribed accounting period by deducting the total at step 4 from the total at step 3. |
6. Tertiary Law
| TL1 |
|---|
| 1. This section shall come into effect on 1 January 2021. 2. Where a tour operator, in the same financial year, supplies:- (a) Margin Scheme supplies or Margin Scheme packages which are to be enjoyed wholly outside the United Kingdom, and (b) Margin Scheme supplies or Margin Scheme packages which are to be enjoyed wholly or partly within the United Kingdom, the Commissioners of HMRC may, on being given written notification by the tour operator no later than the due date for rendering his first VAT return for the financial year in which the supplies are to be made, allow the supplies under sub-paragraph (a) to be valued separately from those under sub-paragraph (b). 3. Where a tour operator, under paragraph 2 above, has separately valued Margin Scheme supplies enjoyed wholly outside the United Kingdom from supplies of Margin Scheme supplies enjoyed wholly or partly within the United Kingdom, the Commissioners of HMRC may, on being given written notification by the tour operator no later than the due date for rendering his first VAT return for any subsequent financial year, allow supplies to be made in such subsequent financial year to be valued using the method specified at section 8 of this notice. |
| TL2 |
|---|
| 1. This section shall come into effect on 1 January 1998. 2. Where:- (a) a supply of goods or services is acquired by a tour operator for the purpose of supplying a Margin Scheme supply, and (b) the value of the supply to the tour operator is expressed in a currency other than sterling, the tour operator must convert such value into sterling for the purposes of steps 2 and 3 of section 8 of this notice or step 2 of section 11 of this notice. 3. For the purposes of paragraph 2 above, the tour operator must use: (a) the rate of exchange published in the Financial Times using the Federation of Tour Operators’ base rate current at the time such supplies were costed by the person from whom the tour operator has acquired the goods or services, or (b) the commercial rate of exchange current at the time that the supplies in his brochure were costed, or (c) the rate published in the Financial Times on the date that the tour operator pays for the supplies, or (d) the rate of exchange which was applicable to the purchase by the tour operator of the foreign currency which they used to pay for those supplies, or (e) the period rate of exchange published by HMRC for customs purposes in force at the time the tour operator pays for those supplies. 4. Where the methods at paragraph 3(a) or (b) above are used, the tour operator must publish the rate in any brochure or leaflet in which these supplies are held out for sale. 5. The Commissioners of HMRC may, on being given written notification by a tour operator no later than the due date for rendering his first return of his financial year, allow a different method to be used in that financial year from that used in the previous financial year. |
| TL3 |
|---|
| 1. This section shall come into effect on 1 October 2010 2. Where possible the value of any in-house supplies shall be valued by reference to their market value and the value of Margin Scheme supplies and agency supplies shall be determined by applying the formula set out in section 8 of this notice (hereinafter referred to as the ‘market value calculation’), unless during the relevant period all such supplies are liable to VAT at the same rate, in which case the value shall be determined by applying the formula set out in section 11 of this notice (hereinafter referred to as ‘the simplified calculation’). 3. On completing the steps in the market value calculation the figures produced must be entered into the cost-based calculation as detailed in section 9 together with any packages, or parts of packages, for which the market value calculation is not being done. 4. Where the cost-based calculation in TL4 accurately reflects the structure of the package holidays you may opt to use the cost-based calculation for all packages regardless of whether a market value can be established for some or all of the packages and section 8 calculation may be ignored. 5. Where the market value calculation has been used a tour operator may only cease to use that method where it becomes impossible to continue to determine a market value of the supply in question or where the cost-based calculation accurately reflects the structure of the package. A change of method to gain a more favourable VAT outcome is not permitted. |
| TL4 |
|---|
| 1. Subject to sections TL1 and TL3 of section 13 of this Notice, the value of Margin Scheme supplies, in-house supplies and agency supplies shall be determined by applying the formula set out in section 9 of this notice (hereinafter referred to as the ‘cost-based calculation’), unless during the relevant period all such supplies are liable to VAT at standard rate, in which case the value shall be determined by applying the formula set out in section 11 of this notice (hereinafter referred to as ‘the simplified calculation’). 2. The provisional value of Margin Scheme supplies, in-house supplies and agency supplies shall be determined in accordance with the formula set out in:- section 10 of this notice, where the cost-based calculation applies, or section 12 of this notice, where the simplified calculation applies. 3. A tour operator shall be required to account for VAT on the provisional value of his supplies of Margin Scheme supplies, in-house supplies and agency supplies on the VAT return for the prescribed accounting period in which the supplies are made. 4. The difference between the amount of VAT due on the value of Margin Scheme supplies, in-house supplies and agency supplies supplied during a tour operator’s financial year, and the amount of VAT paid on the provisional value of those supplies, shall be adjusted by the tour operator on the VAT return for the first prescribed accounting period ending after the end of the financial year during which the supplies were made. |
| TL5 |
|---|
| 1. For the purpose of sections 8 to 13 of this notice:- (a) ‘in-house supply’ means a supply by a tour operator which is neither a Margin Scheme supply nor an agency supply, (b) ‘market value’ means the selling price of the in-house element of a ‘Margin Scheme package’ were it to be sold independent of the package in an arms-length transaction to an unconnected person. (c) ‘cost based method’ means the calculation in section 9 of this notice. (d) ‘agency supply’ means a supply arranged by a tour operator between 2 other persons, in the capacity of an agent or intermediary for either person, for which the tour operator receives a consideration, the value of which is not readily identifiable, (e) ‘Margin Scheme package’ means a single transaction which includes one or more Margin Scheme supplies, (f) ‘financial year’ means a period corresponding to a tour operator’s financial year for accounting purposes, (g) ‘direct costs’ means costs which are directly and specifically attributable to the provision of in-house supplies, to the extent that they are so attributable, (h) ‘VAT fraction’ has the same meaning as in VAT guide (VAT Notice 700), (i) ‘Margin Scheme Supply’ has the same meaning as ‘designated travel service’ in paragraph 3(1) of the Value Added Tax (Tour Operators) Order 1987 |
(First published 28 April 2023)
Notice made under the Value Added Tax (Margin Schemes and Removal or Export of Goods: VAT-related Payments) Order 2023
Where terms are used in this notice which are defined in the Value Added Tax (Margin Schemes and Removal or Export of Goods: VAT-related Payments) Order 2023, they have the same meaning.
A. Claims made under article 8 of the Value Added Tax (Margin Schemes and Removal or Export of Goods: VAT-related Payments) Order 2023
Payment representative
The following text has the force of law under article 6(6) of the Value Added Tax (Margin Schemes and Removal or Export of Goods: VAT-related Payments) Order 2023.
An application to appoint a person as a payment representative must be made on the HMRC form entitled ‘Second-hand Motor Vehicle Payment Scheme — Appoint a payment representative’ and the declaration on that form must be signed by both the claimant and the payment representative.
The form can be sent to HMRC by email to [email protected] or by post to:
HM Revenue and Customs — Campaigns & Projects
VAT Overseas Repayment Unit S1250
Benton Park View
NEWCASTLE UPON TYNE
NE98 1ZZ
United Kingdom
Where HMRC agrees to the appointment, it will notify both the claimant and the payment representative in writing (including in electronic form) and the appointment will take effect from the date shown on that notification.
HMRC may refuse to agree to the appointment of a person as a payment representative if it is satisfied that the person is not a fit and proper person to act in that capacity.
Where a person is appointed as a payment representative in accordance with this notice HMRC may terminate that person’s appointment if it is satisfied that the person is not, or is no longer, a fit and proper person to act in that capacity.
Where HMRC terminates an appointment, it will notify both the claimant and the payment representative in writing (including in electronic form), and the appointment will be terminated from the date shown on that notification.
Where a person is appointed as a payment representative in accordance with this notice, either the claimant or payment representative may terminate the appointment by notifying HMRC and the other party in writing (including in electronic form), and the termination will take effect from the date shown on that notification.
Method of claiming
The following text has the force of law under article 8(1) of the Value Added Tax (Margin Schemes and Removal or Export of Goods: VAT-related Payments) Order 2023.
A claim under article 8 must be made on HMRC form VAT67 including the continuation sheet VAT67(CS), unless otherwise agreed by HMRC.
HMRC may agree, where requested by a claimant, that a claim can be made other than on form VAT67. However, the claim must contain the same information as is on form VAT67.
A claim can be sent to HMRC either electronically or by post.
A claim can be sent to HMRC electronically using HMRC’s Secure Data Exchange Service (SDES) system.
A claim can be sent to HMRC by post to:
HM Revenue and Customs — Campaigns & Projects
VAT Overseas Repayment Unit S1250
Benton Park View
NEWCASTLE UPON TYNE
NE98 1ZZ
United Kingdom
A claim must be accompanied by:
- a purchase invoice as specified in the direction made under article 11 in this notice for each motor vehicle in respect of which a claim is made, and where the purchase invoice has been made out by the claimant, proof of payment such as an entry on a bank statement
- documents as specified in the direction made under article 11 in this notice that show that each motor vehicle has been exported to the EU Member State in which the claim is made and
- proof that the claimant was registered for VAT in the Member State that the motor vehicle has been exported to, during the period in relation to which a claim is made — this may include a certificate from the official authority of the EU member state that the claimant has exported vehicles to, showing that the claimant’s status as VAT registered in that member state during that period, called a ‘certificate of status’.
A certificate of status must contain:
- the name, the address and official stamp of the authorising body (or other recognised identification mark)
- claimant’s name and address
- the nature of claimant’s business and
- claimant’s VAT registration number
The following text has the force of law under articles 8(3), 8(5) and 8(6) of the Value Added Tax (Margin Schemes and Removal or Export of Goods: VAT-related Payments) Order 2023.
The first prescribed period will be for the period of 14 months from 1 May 2023 to 30 June 2024 inclusive. A maximum of 5 claims may be made in respect of this prescribed period.
After 30 June 2024 prescribed periods will be periods of 12 months beginning on 1 July of each calendar year.
Error correction
The following text has the force of law by virtue of article 9(2) of the Value Added Tax (Margin Schemes and Removal or Export of Goods: VAT-related Payments) Order 2023.
An overstated entitlement on a claim must be notified to HMRC by email to: [email protected] or by post to:
HM Revenue and Customs — Campaigns & Projects
VAT Overseas Repayment Unit S1250
Benton Park View
NEWCASTLE UPON TYNE
NE98 1ZZ
United Kingdom
A notification should include:
- the claim period that the errors occurred in
- the vehicle or vehicles the errors relate to
- the amounts of VAT-related payment wrongly claimed and
- what the correct amounts should have been
Where there are overstated entitlements on more than one claim, they can be included on a single notification providing that they are separately identified.
B Claims made under article 7 and article 8 of the Value Added Tax (Margin Schemes and Removal or Export of Goods: VAT-related Payments) Order 2023
Records which must be kept
The following text has the force of law under article 11 of the Value Added Tax (Margin Schemes and Removal or Export of Goods: VAT-related Payments) Order 2023.
Stock book
A stock book must be kept which records the following details for each motor vehicle on which a claim is made:
- stock book reference number for each vehicle in numerical sequence
- date of purchase
- purchase invoice number
- purchase price
- name of seller
- description of the vehicle (including make and model, engine size and colour)
- DVLA / Isle of Man Vehicle Licensing logbook reference number
- vehicle identification number or chassis number
- vehicle registration number
- date of first registration
- date the vehicle is removed from Great Britain to Northern Ireland or exported from Great Britain to an EU Member State
- country that the vehicle is exported to
- value on which claim is based (if different from the purchase price)
- date that the vehicle is sold
- sales invoice number
- name and address of buyer
- selling price and
- details of how the vehicle was disposed of (if not sold)
The stock book must be kept in writing (and may be kept in electronic form) and must be maintained separately from any records being maintained for the purposes of a second-hand margin scheme.
Invoices
An invoice from the seller, or a self-billing invoice, must be held for each vehicle on which a claim is made. That invoice must include the following information:
- the date of purchase
- the seller’s name and address
- the claimant’s name and address, or that of the claimant’s business
- the vehicle’s unique stock book number (unless the vehicle was bought from another VAT-registered business)
- the invoice number (unless the invoice is made out by the claimant)
- the vehicle description
- the total price — the claimant must not add any other costs to this price and
- if the vehicle was bought from another VAT-registered business under the margin scheme for second-hand goods
Documents that evidence removal or export
You must keep documents which relate to the removal or export of each vehicle on which a claim is made which show the:
- mode of transport involved
- route of the movement (for example, the port of exit)
- date of departure of the vehicle and
- delivery address for the vehicle
Examples of such documents include, but are not limited to:
- any customs declaration or other documentation that shows a vehicle has been exported from Great Britain or imported into the EU
- travel tickets
- name of ferry or shipping company and date of sailing or airway number and airport, road consignment (CMR) note, courier dispatch paperwork, bill of lading or airwaybill and
- details of any haulier or other courier who makes the movement on behalf of the claimant, including any invoices they have issued or information they have provided to the claimant
Period of retention of records
The stock book and other documents that are required to be retained in relation to a claim must be kept for 6 years beginning with the date of the claim to which they relate.
If this period of retention causes serious storage problems or undue expense, then the claimant should contact VAT general enquiries.
HMRC may allow some records to be kept for a shorter period.