Here we’ve tried to explain everything you’ve ever wanted to know about the VAT Auctioneers’ Scheme works but were to afraid to ask HM Revenue & Customs.
So, firstly you may have noticed your auction invoice looks different to a retail invoice that you’d receive when buying whisky from a shop. When you buy and sell spirits, wines and memorabilia in our auction the transaction falls under Auctioneers’ Scheme for antiques and collectors’ items.
What’s the difference to UK buyers between standard retail VAT and auction margin scheme?
This is probably one of our most frequently asked questions. The best way to explain this is to illustrate with an example.
Say you win a bottle at auction and the hammer price is £100 and the commission is £15. The price you pay on the auction margin scheme is £118 because VAT is only charged on the £15 commission, not the £100 hammer price.
The auction margin scheme calculation is:
Hammer Price
+
Buyer’s Commission
+
20% VAT on the commission only
=
Total (before delivery charges)
In contrast, on standard retail VAT the total you pay on a £100 bottle would be £138 because you’re being charged 20% VAT on the £100 hammer price as well as the £15 commission.
The standard retail VAT calculation is:
Hammer Price
+
Buyer’s Commission
=
Sub Total
+
20% VAT on the Sub Total
=
Total (before delivery charges)
For VAT registered business buyers in the UK. We recommend you request standard VAT invoices from us. This way you can reclaim the VAT on your auction purchase. So, for the example above the total cost of the £100 bottle is £115 ex VAT.
What’s the advantage of buying at auction?
Buying at auction on the margin scheme means you are not charged VAT on the hammer price of the spirits you buy (and sell), so you are saving money. You pay 20% VAT only on a the value of the services (or ‘margin’) that we’ve supplied to you.
If you already have a working knowledge of basic VAT principles and you’ve read this far you might enjoy more quick answers to the rest of our most frequently asked questions about the auction margin scheme:
How The Scheme Works
When we calculate the margin under the scheme, we add the value of our services to the buyer to the hammer price.
We also subtract the value of our services to the seller from the hammer price.
How we calculate VAT on spirits you buy and sell under the Auctioneers’ Scheme
To calculate the amount of VAT due on a sale, work from the hammer price, as follows:
The margin is the commission (sometimes referred to as ‘premium’) charged on the hammer price.
To calculate the VAT on the sale, you multiply the margin by 1/6 (the VAT fraction).
We are not allowed to show the VAT charges included in the scheme calculations separately.
So why does my invoice show 0% VAT?
Our invoices must clearly show the selling or purchase prices for your own calculations but we are not allowed to show the VAT charges included in the scheme calculations separately.
If we’ve made any charges which are not included in our scheme calculations we must invoice for them separately and charge VAT on them under the normal rules.
For zero-rated goods, for example antique books, the margin will also be zero-rated.
UK vs International
Sales made under the Auctioneers’ Scheme within the UK are liable to VAT. Items that are exported will not have VAT added to the margin.
What is shown on your invoice?
Whether you are a buyer or a seller you will always receive an invoice showing:
your name and address
our name and address and VAT registration number
order reference number
invoice number
date of transaction
list of items
the hammer price of each item
any commission/premium charges (including VAT)
the net amount due
Wait! I’m VAT registered, wouldn’t it be better for me to be invoiced under the normal VAT rules?
If you’re a buyer and you would prefer to pay VAT separately on the hammer price and other charges you can opt out of the Auctioneers’ Scheme. Just contact us and ask us to treat the transaction outside the scheme. We will invoice you for your next transaction under the normal VAT rules.
