How the VAT Margin Scheme return differs from a standard return
On a standard VAT return, you report output VAT on the full value of your sales and claim input VAT on your purchases. The Margin Scheme works differently: you only account for VAT on the margin (profit) you make on eligible goods, and you cannot reclaim VAT on the purchase price of those goods. This changes how you complete several boxes on the VAT100 form.
The figures you need before you start
Before completing your return, you need to total up the following from your stock book for the VAT period:
- Total selling prices of all eligible goods sold in the period
- Total purchase prices of all eligible goods sold in the period
- Total margin (selling prices minus purchase prices)
- Total VAT due on that margin (margin ÷ 6 for the standard 20% rate)
- Any standard-rated sales outside the scheme (sold with full VAT)
- Any input VAT you can reclaim on business overheads (not on margin scheme stock)
If you use global accounting, you will also need the opening and closing stock values. If you use individual accounting, every eligible item must be listed individually in your stock book before you can calculate the totals.
Completing the VAT100 form — box by box
Box 1 — VAT due on sales: Include the VAT calculated on your margin scheme sales (margin ÷ 6), plus any output VAT on standard-rated sales outside the scheme. Do not include the full selling prices of margin goods here.
Box 6 — Total value of sales: This is where dealers often go wrong. For margin scheme sales, you enter only the VAT-exclusive margin (not the full selling price). For standard-rated sales, you enter the full VAT-exclusive selling price. Add both together for this box.
Box 4 — VAT reclaimed: You can reclaim input VAT on business costs that are not directly related to margin scheme stock — for example, rent, software, professional fees, and utilities. You cannot reclaim VAT on the purchase price of margin scheme goods even if you have a VAT receipt, because those goods were purchased under the scheme.
Box 7 — Total value of purchases: Enter your total business purchases (excluding the purchase price of margin scheme stock, which does not carry reclaimable VAT).
Boxes 2, 3, 5, 8, and 9 follow standard rules for any EU acquisition VAT or EC sales. Most UK-only dealers will leave boxes 8 and 9 blank.
Deadlines and submission
VAT returns must be submitted online and payment made within one calendar month and seven days of the end of each VAT period. For a quarter ending 31 March, the deadline is 7 May. HMRC charges automatic late filing penalties and interest on late payments, so it is important to have your stock book figures ready well before the deadline.
If you find yourself rushing to total up records at the last minute each quarter, it is usually a sign that your record-keeping process needs to be automated or restructured.
What to do if you have made a mistake on a previous return
Errors under £10,000 (or under 1% of your Box 6 figure, up to £50,000) can be corrected on your next VAT return by adjusting the relevant boxes. Larger errors must be disclosed to HMRC separately using form VAT652. Deliberately concealing errors can result in penalties of up to 100% of the underpaid VAT, so it is always better to correct mistakes proactively.
If you are unsure whether your past returns have been completed correctly — particularly if you have recently switched to the Margin Scheme or taken over a business that used it — it is worth having your records reviewed by an accountant who specialises in margin scheme compliance.
How AutoVAT prepares your return figures
AutoVAT calculates all the figures you need for your VAT return automatically. At the end of each quarter, you receive a report showing the exact figures for each box on the VAT100 — total eligible margins, VAT due, and any standard-rated figures to include. Your accountant or bookkeeper can submit the return directly from these figures, or we can guide you through submitting it yourself via your HMRC VAT online account.
