How To Understand The Auctioneers’ Scheme and Margin Scheme

This post is only of interest if you want to learn about VAT under the auctioneers scheme. If you're not interested in learning about VAT under the auctioneers' scheme this post is definitely not for you. Really, we're not just saying that.

How To Understand The Auctioneers’ Scheme and Margin Scheme

Here we’ve tried to explain everything you’ve ever wanted to know about the VAT Auctioneers’ Scheme works but were to afraid to ask HM Revenue & Customs.

Here we assume you already have a working knowledge of basic VAT principles. It’s a quick overview to answer our most frequently asked questions.
So, firstly you may have noticed your auction invoice looks different to a retail invoice that you’d receive when buying whisky from a shop. When you buy and sell spirits in our auction the transaction falls under Auctioneers’ Scheme for antiques and collectors’ items.

In short, this means that you are not charged VAT on the hammer price of the spirits you buy and sell – saving you 20% – VAT is charged only on a the value of the services (or ‘margin’) that we’ve supplied to you.

 

1

How The Scheme Works

When we calculate the margin under the scheme, we add the value of our services to the buyer to the hammer price.
We also subtract the value of our services to the seller from the hammer price.

2

How we calculate VAT on spirits you buy and sell under the Auctioneers’ Scheme
To calculate the amount of VAT due on a sale, work from the hammer price, as follows:

The margin is the commission (sometimes referred to as ‘premium’) charged on the hammer price.

To calculate the VAT on the sale, you multiply the margin by 1/6 (the VAT fraction).

We are not allowed to show the VAT charges included in the scheme calculations separately.

3

So why does my invoice show 0% VAT?

Our invoices must clearly show the selling or purchase prices for your own calculations but we are not allowed to show the VAT charges included in the scheme calculations separately.

If we’ve made any charges which are not included in our scheme calculations we must invoice for them separately and charge VAT on them under the normal rules.

For zero-rated goods, for example antique books, the margin will also be zero-rated.

 

4

Sales to other EC member states

Sales made under the Auctioneers’ Scheme to other member states are treated in the same way as sales within the UK. The sales are liable to VAT in the UK. The goods will not be subject to acquisition VAT when they are taken into another EC member state.

 

5

What is shown on your invoice?

Whether you are a buyer or a seller you will always receive an invoice showing:

your name and address
our name and address and VAT registration number
order reference number
invoice number
date of transaction
list of items
the hammer price of each item
any commission/premium charges (including VAT)
the net amount due

6

Wait! I’m VAT registered, wouldn’t it be better for me to be invoiced under the normal VAT rules?

If you’re a buyer and you would prefer to pay VAT separately on the hammer price and other charges you can opt out of the Auctioneers’ Scheme. Just contact us ask us to treat the transaction outside the scheme. We will invoice you for your next transaction under the normal VAT rules.