Margin scheme on your VAT return
Enter what you sold under the margin scheme this quarter, and what you paid for margin scheme stock you bought in it. You'll get boxes 1, 6 and 7, with the working.
Items you sold this quarter
Include any delivery you charged the buyer in the selling price. The example figures are from the worked example below; change them to yours.
Your margin scheme figures
Add these to the figures for your normal VAT sales and purchases. Margin scheme sales and purchases don't go in boxes 8 and 9.
How the three boxes work
HMRC's rules for the margin scheme on a VAT return are short:
- Box 1: the VAT due on the margin of every eligible item you sold in the period. For each item, that's (selling price − what you paid) ÷ 6 at the 20% rate. An item sold at a loss adds nothing.
- Box 6: the full selling price of every eligible item you sold, less the VAT in box 1.
- Box 7: the full purchase price of the eligible items you bought in the period. It's about when you bought, not when you sold, so stock you haven't sold yet counts, and items you bought in an earlier quarter don't.
A worked example
A shop selling used cameras, watches and clothing sold four items in the quarter. The camera was bought in the previous quarter. The other three were bought this quarter, along with two more items, costing £370 together, that haven't sold yet.
| Item | Paid | Sold for | Margin | VAT (÷ 6) |
|---|---|---|---|---|
| Canon AE-1 camera | £120.00 | £185.00 | £65.00 | £10.83 |
| Omega Seamaster watch | £900.00 | £1,150.00 | £250.00 | £41.67 |
| Barbour jacket | £60.00 | £45.00 | −£15.00 | £0.00 |
| 50mm lens | £400.00 | £520.00 | £120.00 | £20.00 |
| Total | £1,900.00 | £72.50 |
- Box 1: £72.50. The jacket's £15 loss doesn't reduce the VAT on the others.
- Box 6: £1,900.00 − £72.50 = £1,827.50.
- Box 7: £900 + £60 + £400 + £370 = £1,730.00. The camera's £120 was in last quarter's box 7.
The shop adds these to its normal VAT figures, such as VAT it charged on new accessories (boxes 1 and 6) and VAT it paid on repairs and overheads (boxes 4 and 7).
Margin scheme VAT returns, simply
Which VAT return boxes do margin scheme sales go in?
Box 1 gets the VAT due on the margin of every eligible item you sold in the period. Box 6 gets the full selling price of those items, less that VAT. Box 7 gets the full purchase price of eligible goods you bought in the period, whether or not you've sold them yet.
Do margin scheme sales go in boxes 8 and 9?
No. HMRC says you don't have to include margin scheme purchases or sales in boxes 8 and 9.
What if I sold something at a loss?
There's no VAT on that item, so it adds nothing to box 1, but its selling price still goes in box 6. Under the standard margin scheme you can't set the loss against the VAT on other items.
How does global accounting change it?
The same boxes apply, but you work out the VAT on the period's total sales minus total purchases instead of item by item. If purchases are bigger, no VAT is due, and the negative margin is carried forward and added to the next period's purchases.
Is delivery part of the selling price?
Yes. HMRC says the selling price is everything you receive for the goods, including incidental expenses directly linked to the sale, so delivery you charge the buyer goes into the margin.
This page is a guide based on HMRC's margin scheme guidance. It doesn't replace advice from your accountant.
Selling on Shopify? MarginVAT fills in these boxes for you.
Every sale is booked as it happens, so boxes 1, 6 and 7 are ready for each VAT period, with an export for your accountant. We'll email you once, at launch.