Global accounting for second hand goods

Global accounting is a simplified version of the VAT margin scheme for dealers in bulk, low value second hand goods. Instead of working out a margin on each item, you total your eligible purchases and eligible sales for each VAT period and pay one sixth of the difference. It is only available for items bought for £500 or less, and some goods such as vehicles, boats and caravans are excluded whatever their price.

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Why does global accounting exist?

The standard margin scheme for second hand goods requires a stock book entry for every item. HMRC’s manual at VATMARG03050 explains that global accounting was introduced for businesses trading in bulk volume, low value goods that might find those detailed records impractical: house clearance dealers, second hand bookshops, retro clothing sellers and similar trades. The legal basis is article 13 of the VAT (Special Provisions) Order 1995 (SI 1995/1268), made under section 50A of the VAT Act 1994.

VATMARG03050 points out two features that make it more generous than the item by item scheme. It effectively gives a tax credit when goods are bought, rather than waiting for a sale, and it lets a loss on one item be offset against profit on others. Those features are the reason HMRC restricts which goods can use it.

Which goods can be sold under global accounting?

The goods must be eligible for the margin scheme in the first place: second hand goods, works of art, antiques or collectors’ items, bought on an invoice that does not show VAT separately. VATMARG03100 then limits the scheme to items with a purchase price of £500 or less each. Regardless of price, these goods are excluded:

aircraft
boats and outboard motors
caravans and motor caravans
horses and ponies
motor vehicles, including motorcycles, unless broken up for scrap

HMRC’s guidance also bars the scheme if you use eligible items to make something that is not eligible, such as turning second hand fabric into new cushion covers, and if the purchase invoice shows VAT separately.

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How do bulk purchases and collections work?

Bulk lots are common in this trade, so the £500 test applies to individual items rather than the whole lot. VATMARG03200 says a bulk purchase costing more than £500 in total can go into global accounting, but any item within it with an individual purchase value over £500 must be deducted from the total and excluded. That item can be sold under the standard margin scheme or the normal VAT rules.

VATMARG03250 lets you split collections and sell the pieces separately, or combine items, for example using one as a spare part for another. The limit is that an eligible item bought for £500 or more and sold in the same state stays a single item. HMRC’s example is a tea set bought for more than £500 and sold as a tea set: it cannot go through global accounting even though each cup and saucer is worth less than £500.

Scrap is treated separately. Motor vehicles are excluded, but VATMARG03300 allows global accounting for the parts of a vehicle broken up by a salvage business, provided the parts are eligible. If the vehicle was in your second hand car stock book, close that entry and transfer the details, and keep commercial evidence that the vehicle no longer exists, such as an end of life certificate.

How is the VAT calculated each period?

At the end of each VAT period you add up the purchase price of all eligible goods bought and the selling price of all eligible goods sold. The selling price includes everything received for the goods, including incidental expenses linked to the sale and accessories fitted before the sale. Deduct total purchases from total sales to find the gross margin, then multiply by 1/6. The VAT is due on the difference between what you paid and what you sold the goods for, not on your overall profit.

If purchases exceed sales, the margin is negative and no VAT is due. Article 13(6) of the Order requires the excess to be carried forward and added to purchases in the next period. HMRC’s guidance says you cannot offset a negative margin against any other figure. VATMARG03550 notes that negative margins often arise when a business first joins, but HMRC expects a viable business to show a positive margin eventually.

Illustration only. In a quarter a dealer buys eligible stock for £9,000 and sells eligible goods for £13,200. The margin is £4,200 and the VAT is £700. In the next quarter purchases are £12,000 and sales £10,800, a negative margin of £1,200. No VAT is due, and the £1,200 is added to the following quarter’s purchases.

What about stock on hand when you join?

When you start, you may include eligible stock already on hand in your first period’s purchases. You need to identify which stock is eligible and its purchase value, normally from the original purchase invoices. VATMARG03450 suggests a stock take as one way of setting the opening figure. If you are newly registered or the invoices are missing, another fair and reasonable method can be used. Stock you leave out will bear VAT on the full selling price when sold.

VATMARG03500 says retrospective use of the scheme is allowed only in exceptional circumstances.

What records and invoices does global accounting need?

You do not need a stock book, but HMRC’s guidance requires purchase and sales records showing the invoice number where there is one, the date, a description of goods and the total price, together with your VAT calculation. Records must be up to date, clearly distinguishable from other records and kept for 6 years. VATMARG03350 adds that global accounting goods must be clearly separated from other goods, so mark ups and apportionment are not allowed. Retailers can record sales in the usual way, for example through the till, and transfer daily takings for eligible goods to the global accounting record. Our guide to recording daily takings explains good practice.

When you sell to another VAT registered dealer you must issue an invoice showing your name, address and VAT number, the buyer’s name and address, invoice number, date, a description specific enough to show eligibility, and the total price without VAT shown separately. It must carry the statement “global accounting invoice”. HMRC gives “4 tables, 10 chairs” as acceptable and says “assorted goods” is not. VATMARG03150 adds that purchase invoices you make out yourself must include the seller’s name and address.

What adjustments are needed during and at the end of the scheme?

If goods already counted in purchases are later sold outside the scheme, for example exported, you deduct their purchase value from total purchases in that period (VATMARG03400). Where the exact value is unknown because the item came in a bulk lot, apportion fairly, be able to show HMRC how you did it and keep the calculation for 6 years. Goods lost through breakage, theft or destruction must also be deducted from purchases.

When you leave the scheme, perhaps on deregistration, you make a closing adjustment by adding the purchase value of closing stock to sales for the final period, repaying the credit already taken. This does not apply if the total VAT due on stock on hand is £1,000 or less. A transfer of a going concern is dealt with separately.

The common errors are including items costing over £500, forgetting to remove exported or stolen goods from purchases, and keeping records that cannot be checked. HMRC’s guidance warns that if it cannot check the margins declared, VAT will be due on the full selling price.

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Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 19 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.