The written agreement margin scheme is an arrangement between a business and its customers that allows them to pay a reduced amount of VAT on their purchases. This scheme is commonly used in the retail industry but can also be applied in other sectors where large volumes of goods are sold.
The main benefit of this scheme is that it simplifies the process of calculating VAT for both the business and the customer. Instead of having to calculate VAT on every individual item sold, the business can apply a fixed percentage to the total value of the goods sold under the scheme. This means that the customer can benefit from reduced prices, while the business can benefit from reduced administrative costs.
To qualify for the written agreement margin scheme, the business must meet certain criteria. They must be selling second-hand goods, works of art, antiques, or collector`s items, and the goods must have been previously owned and used by someone else. The goods must also be sold in a condition that is not substantially different from their original condition.
The scheme requires the business to keep detailed records of all purchases and sales made under the scheme. These records must include the date of purchase, the purchase price, and the date and price of sale. The records must be kept for at least six years and must be made available to HM Revenue & Customs if requested.
It is important to note that the written agreement margin scheme cannot be used for all second-hand goods. Some items, such as cars, motorcycles, and boats, are subject to different VAT rules and are not eligible for the scheme.
In conclusion, the written agreement margin scheme is a useful tool for businesses that sell second-hand goods, works of art, antiques, or collector`s items. By simplifying the process of calculating VAT, it can help businesses reduce administrative costs while offering customers reduced prices. However, it is important for businesses to meet the eligibility criteria and keep detailed records to comply with the rules of the scheme.