Beyond cars: the margin scheme for second-hand goods, and when to use global accounting

If you deal in second-hand goods — antiques, collectables, art, vintage clothing, used books, reclaimed furniture — the same logic that helps car dealers applies to you. Buy from a private seller who can't charge you VAT, sell on, and the margin scheme lets you account for VAT on your profit margin rather than the full selling price, at the same one-sixth fraction.

The eligibility test is the same: the goods must have been bought from someone who couldn't charge you VAT (a private individual, an unregistered seller, or another margin-scheme dealer), and you must not have reclaimed input VAT on the purchase. A handful of categories are excluded outright — notably investment gold, and goods bought on a normal VAT invoice.

The problem with tracking every teacup

The standard margin scheme is item-by-item. Every piece needs its own stock-book entry, and you can't net a loss on one item against a profit on another. That's manageable for a £4,500 writing desk. It's miserable for a charity shop or a vintage-clothing trader moving hundreds of low-value items a week.

For exactly that situation there's global accounting — a simplified version of the margin scheme for low-value, bulk stock.

Under global accounting you don't track each item. You take your total eligible purchases and total eligible sales for the VAT period, and pay VAT on the difference: (sales − purchases) × 1/6.

Two features make it genuinely easier:

• Negative margins carry forward. If in a period your eligible purchases exceed your eligible sales, no VAT is due and the excess is carried into the next period and added to that period's purchases. (The standard scheme has no such relief — a loss is just a nil.)
• No per-item stock book — you keep aggregate purchase and sale records instead.

The boundaries to know

Global accounting has firm limits, and they're the bits worth getting right:

• £500 per item ceiling. Any individual item costing more than £500 can't go in global accounting — it must be tracked under the standard margin scheme instead. If a bulk purchase includes a dearer item, you separate it out.
• Motor vehicles are excluded (unless you're breaking a vehicle for scrap and selling the parts).
• You can't mix schemes on the same item type — pick one approach per category of goods.
• The usual exclusions (anything bought with VAT reclaimed, plus categories like investment gold) still apply.

Where OneSixth comes in

The hard part of either scheme is staying inside the rules while keeping the admin light. OneSixth runs both — item-level margin tracking where you need it, global accounting totals where you don't, including carrying a negative margin forward automatically — and posts the period's VAT to Xero, QuickBooks, Sage or FreeAgent with the workings attached.