VAT margin schemes tax the difference between what you paid for an item and what you sold it for, rather than the full selling price. You pay VAT at 16.67% (one-sixth) on the difference.
You can choose to use a margin scheme when you sell:
works of art
You cannot use a margin scheme for:
any item you bought for which you were charged VAT
You buy a work of art for £1,500 and sell it for £2,000. Using a margin scheme, you pay VAT at 16.67% (one-sixth) on the difference: £500. This means you will pay £83.33.
How To Start
You can start using a margin scheme at any time by keeping the correct records (external link), and then reporting it on your VAT return (external link). You do not have to register.
You will have to pay VAT (external link) on the full selling price of each item if you do not meet all the scheme’s requirements.
There are special rules if you are selling:
high volume, low price items - you can use the Global Accounting Scheme (external link), a simplified version of the margin scheme
There are also special rules for dealers (external link), pawnbrokers (external link) and auctioneers (external link).