The VAT margin scheme for used and refurbished phones
Selling used or refurbished phones? Whether you pay VAT on your margin or on the whole price depends on where each phone came from. Here's how to tell, from HMRC's rules, in plain English.
A trade-in you bought for £250 and sold for £330
| VAT on the whole price£330 ÷ 6 | £55.00 |
| VAT under the margin schemeonly on your £80 margin: £80 ÷ 6 | £13.33 |
That's £41.67 less VAT on one phone, if it qualifies.
Where the phone came from decides it
- A trade-in, or bought from a member of the public in the UK: yes. Make out the purchase invoice yourself, with the date, their name and address, yours, a description and the price you paid.
- Bought from a UK dealer who sold it under the margin scheme: yes. Their invoice says "margin scheme - second hand goods" and shows no VAT. Keep it, and note their stock number.
- Bought from a UK business that charged you VAT: no. Reclaim the VAT you paid in the normal way, and charge VAT on the full selling price.
- Imported, from the EU, the US, Hong Kong or anywhere outside the UK: no. HMRC says you can't use a margin scheme for goods you import into the UK unless they're works of art, collectors' items or antiques. Reclaim the import VAT in the normal way, and charge VAT on the full selling price.
- New stock from a distributor: no. The margin scheme is for second-hand goods.
Not sure about a particular phone? The eligibility checker asks the same questions.
What goes into the margin
- Purchase price: what you paid the seller, including anything they charged on top, such as delivery or an auction buyer's premium.
- Not repairs or parts: screens, batteries, parts, accessories and overheads can't be added. Reclaim the VAT on them in the normal way.
- Selling price: everything the buyer pays, including delivery you charge them.
- Sold at a loss: no VAT is due on that phone, but the loss can't reduce the VAT on other phones under the standard scheme.
Each phone needs its own line in your stock book. Tip: put the IMEI in the description, so every phone is easy to trace from purchase to sale.
Cheaper phones: global accounting
If you buy phones for £500 or less each and weren't charged VAT on them, you can use HMRC's global accounting scheme instead. You work out VAT on each VAT period's total sales minus total purchases, not phone by phone. If purchases are bigger, there's no VAT that period, and the difference carries forward.
On Shopify
Shopify works out VAT on the whole price, so margin scheme phones need a few settings and your own records. Our Shopify guide walks through them. The calculator works out any single sale, and the VAT return tool works out a quarter.
This guide is based on HMRC's margin scheme guidance and its import rules, for VAT-registered businesses in Great Britain. It doesn't replace advice from your accountant.
Selling phones on Shopify? MarginVAT keeps imports out of the scheme for you.
When you add a phone, MarginVAT asks where it came from, keeps the stock book, works out the VAT on every sale and issues the margin scheme invoice. We'll email you once, at launch.