2nd hand goods
The VAT arrangements applicable to 2 nd hand goods (including, for example, used cars and works of art) can be either the normal VAT arrangements or the special arrangements applicable to second-hand goods, works of art, collectors' items and antiques (the "margin scheme"), as provided for in Articles 312-325 of the VAT Directive.
In principle, it is the normal VAT arrangements which apply to 2 nd hand goods. This means that the amount on which VAT is charged is the full consideration which the dealer has received from the customer less the amount of VAT relating to the consideration.
However, the margin scheme can be used by a taxable dealer in the following special circumstances:
- Where the 2 nd hand goods were supplied to him by a non-taxable person, or
- Where the 2 nd hand goods were supplied to him by a taxable person whose supplies are exempt from VAT because he engages in an exempt activity, or
- Where the 2 nd hand goods were supplied to him by a taxable person whose supplies are exempt from VAT in accordance with the special scheme for small undertakings, or
- Where the 2 nd hand goods were supplied by another taxable person applying the margin scheme in respect of the goods.
If the margin scheme is applied, the amount on which VAT is charged is the profit margin which is treated as a tax-inclusive amount. In each of the circumstances outlined above, the taxable dealer would, in the absence of the margin scheme, be obliged to charge VAT on the full consideration he would be entitled to receive from the customer and he would not be able to deduct any VAT.