The VAT auctioneers’ scheme

An auctioneer who sells goods in its own name is treated as buying and selling them, so without relief it would owe VAT on the whole hammer price even when the seller is a private individual. The auctioneers’ scheme instead taxes only the auctioneer’s own charges: the margin is the hammer price plus buyer’s premium and other buyer charges, less the hammer price minus the seller’s commission, and the VAT due is one sixth of that margin.

Why would an auctioneer owe VAT on the hammer price at all?

Most auctioneers act as agents for the seller, but VAT looks at whose name the sale is made in. Under section 47(2A) of the VAT Act 1994, an agent acting in its own name is treated as both receiving and making the supply of the goods. HMRC’s VAT Taxable Persons Manual at VTAXPER61500 says an auctioneer is regarded as acting in its own name if it, rather than the seller, issues the invoice or demand for payment. It is then liable for VAT on the sale of the goods whatever the seller’s VAT status.

For a seller who is not VAT registered, that would add VAT to goods that would have carried none if the owner had sold them privately. The auctioneers’ scheme, introduced on 1 June 1995 according to VATMARG04150, removes that distortion by calculating VAT so that the auctioneer’s services are taxed but the goods are not. The legal basis is article 12(7) of the VAT (Special Provisions) Order 1995, which lets an auctioneer acting in its own name take the price at which goods were obtained as the successful bid less its commission, and the selling price as the successful bid plus its charges to the buyer. For how agency status is decided more generally, see agent or principal for VAT.

Which sellers and goods can go through the scheme?

HMRC’s guidance on the scheme (VAT Notice 718/2) says the goods must be eligible and you must check with the seller before the auction. The seller must be one of these:

• a person not registered for VAT
• a VAT registered dealer selling under the standard margin scheme or the Global Accounting scheme
• an insurance company selling eligible goods it obtained through an insurance claim, sold at auction in the same state
• a finance house selling eligible goods it repossessed, sold at auction in the same state

Eligible goods are broadly the second hand goods, works of art, antiques and collectors’ items that qualify for the VAT margin scheme. An extra statutory concession in force since 1 January 1999 (VATMARG04350) extends the scheme to goods grown, made or produced by a non taxable person, including bloodstock or livestock reared from birth. The auctioneer must hold a certificate signed by the seller giving the seller’s name and address, a description of the goods and confirmation that the seller is not registered, nor required to be registered, for VAT. The certificate can be built into the sale entry form.

VATMARG04300 also allows the scheme for sales on behalf of a pawnbroker where the pledgor is not VAT registered and the pawn value is greater than £75. Some goods are excluded. If a seller’s invoice shows VAT separately, the item cannot go through the scheme, and Notice 701/21 paragraph 7.3 says investment gold coins are not eligible either (see VAT on investment gold). Where the conditions are not met, the auctioneer accounts for VAT on the hammer price and on its services under the normal rules for undisclosed agents.

How is the margin worked out?

Notice 718/2 sets out three steps: work out the purchase price and selling price, subtract one from the other to get the gross margin, and multiply the margin by 1/6. That fraction reflects the 20% standard rate.

Purchase price

The hammer price less the commission charged to the seller. No other services supplied to the seller are deducted.

Selling price

The hammer price plus charges made to the buyer, such as buyer’s premium or other commission and incidental costs like packing, transport and insurance.

Two kinds of charge stay out of the calculation: services that are a separate supply in their own right, such as illustrations in the sale catalogue, and indemnity fees where an approved insurance company provides the policy and it is shown on the invoice (VATMARG04150). Charges left out of the scheme must be invoiced separately with VAT under the normal rules. Charges inside the scheme must not show VAT separately.

What does a worked example look like?

This example follows the one HMRC gives at VATMARG04150.

Item	Amount
Hammer price	£10,000
Seller’s commission at 12%	£1,200
Buyer’s premium at 12%	£1,200
Purchase price (hammer less commission)	£8,800
Selling price (hammer plus premium)	£11,200
Margin	£2,400
VAT due (1/6 of margin)	£400

The seller receives £8,800 and the buyer pays £11,200, with no VAT shown on either invoice. If the seller is a dealer using the margin scheme, £8,800 is that dealer’s selling price. If the buyer is a dealer who will resell under the margin scheme, £11,200 becomes its purchase price, which is why the invoices must make both figures clear.

Illustration only. If the auctioneer also charged the buyer £60 for packing and delivery, the selling price would become £11,260, the margin £2,460 and the VAT £410.

What must the invoices show?

The auctioneer issues a separate document to each side. Notice 718/2 lists what each must contain:

• the auctioneer’s name, address and VAT registration number
• the buyer’s or seller’s name and address
• a cross reference to the stock records, such as the stockbook number
• an invoice number and the date of the transaction
• a description of the item and the hammer price
• any charges for services connected with the sale, with no separate VAT amount
• the amount due from the buyer or to the seller

Charges must be allocated to each lot. Where several items are sold for one seller, the total commission must not be put on the invoice for just one item. Goods sold under the auctioneers’ scheme and goods sold under the ordinary margin scheme go on separate invoices to the buyer. Invoices in a foreign currency must show sterling equivalents of the hammer price, commission and other charges.

When is the tax point, and can a sale be moved out of the scheme?

Because the goods are treated as supplied both to and by the auctioneer at the same moment, the two supplies share one tax point: the earlier of handing the goods to the buyer and receiving payment.

The scheme is optional sale by sale. A sale made under the normal rules cannot later be brought into the scheme. The reverse is possible: if a buyer wants the transaction treated outside the scheme, for example to reclaim input tax or because the goods will be exported, the auctioneer may invoice again under the normal rules, provided it can meet the VAT rules for the substitute transaction and both parties still hold the original records. The first entry is cancelled and cross referenced, and the replacement invoice must say the original is cancelled and that the buyer should amend its VAT account. VATMARG04200 adds that this is only allowed within the capping rules that limit how far back VAT can be corrected (see correcting VAT errors).

Imported works of art and sales for creators

An auctioneer acting in its own name may also opt to use the scheme for works of art, antiques and collectors’ items it imports itself for sale, and for works of art obtained from their creators or heirs, even though VAT was charged. It must tell HMRC in writing and give the start date, use the option for at least two years and apply it to all such goods.

What records does the scheme need?

Normal VAT records are kept, plus stock records. A formal stockbook is not compulsory, but if there is none the auctioneer must keep alternatives such as entry forms, sale catalogues, copies of lots and sales of the day, and copies of purchase and sales invoices. Zero rated goods such as antique books produce a zero rated margin, recorded as nil in the VAT due column. Margin scheme sales and purchases must still be shown on the VAT return (see VAT return boxes).

What mistakes come up most often?

• Not checking the seller’s status before the sale. Eligibility depends on who the seller is, and that has to be established in advance.
• Adopting uncollected goods. VTAXPER61500 explains that where an auctioneer has paid the seller and the buyer never collects, the auctioneer adopts the goods as principal and must account for VAT on the full price at the later sale unless a second hand scheme applies.
• Treating catalogue contributions as disbursements. HMRC’s view is that the catalogue is supplied to the auctioneer, so a seller’s contribution forms part of the auctioneer’s own charge.
• Showing VAT on commission. A charge inside the scheme must not show VAT separately.
• No certificate for new goods. The concession for produce and livestock depends on the signed seller certificate being held.

HMRC officers check auctioneers against these points in a VAT compliance check, so the stock records and seller declarations need to be complete for each lot.

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Related Accountapedia entries

• VAT margin scheme for used car dealers
• The VAT margin scheme for second hand goods
• Global accounting for second hand goods
• Do I charge VAT when selling business assets
• What a valid VAT invoice must show

Sources

• GOV.UK: www.gov.uk
• GOV.UK: www.gov.uk
• legislation.gov.uk: SI 1995/1268, article 12
• GOV.UK: Using the auctioneers vat margin scheme
• GOV.UK: www.gov.uk
• GOV.UK: www.gov.uk
• GOV.UK: Gold acquisitions imports investments and vat notice 70121
• GOV.UK: Vat rates
• GOV.UK: www.gov.uk
• GOV.UK: www.gov.uk

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.