Margin Scheme invoicing for second-hand handsets

What the Margin Scheme actually is

Under normal VAT rules, a VAT-registered business charges VAT on the full selling price of whatever it sells and reclaims the VAT it paid on the way in. That works fine for new stock bought from a VAT-registered supplier. It breaks down for second-hand goods bought from members of the public, because a private individual selling their old phone isn't VAT-registered and charges no VAT at all — so there's no input VAT for the shop to reclaim on the purchase. If the shop then had to charge VAT on the full resale price with nothing to offset, it would be paying VAT on money the customer already paid VAT on once, back when the phone was originally bought new. The Margin Scheme exists to stop that double taxation.

Under the scheme, VAT is due only on the margin — the difference between what the shop paid for the handset and what it sold for — rather than on the full selling price. If a shop buys a used iPhone for £142 and sells it for £215, the margin is £73, and VAT is calculated on that £73, not on the full £215. If a phone sells for less than it was bought for, there is no VAT due on that sale at all, because there is no positive margin.

Try it on a handset of your own

The same margin calculator from the homepage — enter what you paid and what you plan to sell for, and see the margin the scheme would tax.

Which handsets qualify

A phone qualifies for the Margin Scheme if it was bought without VAT being charged on it — most commonly because it was bought from a private individual, or from another business that itself sold it under the Margin Scheme and so charged no VAT. A phone bought from a VAT-registered supplier with VAT charged and reclaimed does not qualify; that stock is sold under standard VAT rules instead, with VAT charged on the full selling price. This is a per-item distinction, not a blanket rule for the shop — a phone shop can easily be running Margin Scheme sales and standard-VAT sales side by side on the same day, depending on where each individual handset came from. What determines the treatment is how that specific handset was acquired, not what it is.

Why the invoice looks different

A standard VAT invoice shows the price excluding VAT, the VAT amount, and the VAT rate, broken out as separate figures. A Margin Scheme invoice must not show VAT as a separate amount at all. HMRC's rule is specific here: the customer is shown a single, VAT-inclusive price with no VAT breakdown, because showing a separate VAT figure would let a VAT-registered customer attempt to reclaim VAT on a purchase where, from the seller's side, the VAT due was only ever calculated on the margin, not the full price. Instead, a compliant Margin Scheme invoice carries specific wording confirming the sale was made under the scheme, so it's clear to both parties, and to HMRC on inspection, which set of rules the sale was made under.

What records HMRC expects a shop to keep

Because the VAT due depends on the margin, not the sale price alone, a shop needs a reliable record of what it paid for each handset it resells, not just what it sold it for. HMRC expects that record to tie a specific sale back to the specific purchase that preceded it — a purchase price with no corresponding item-level record is difficult to defend under inspection. This is where the Margin Scheme has a direct dependency on how a shop buys phones in in the first place: a purchase logged on a paper slip with no structured price record makes it far harder to demonstrate the margin on resale months later, when the paper slip has been lost or the handwriting on it is illegible.

How Mobile POS issues the invoice

Every used-phone purchase recorded through Mobile POS keeps the purchase price against that specific handset, tracked by IMEI. When that handset is later sold, Mobile POS issues a Margin Scheme invoice for the sale — a single VAT-inclusive price with the required wording and no VAT breakdown shown to the customer — generated from the same purchase and sale records the shop already has, rather than requiring a member of staff to remember which invoice template applies to which sale. The system does not calculate or file your VAT return; the return itself remains a standard nine-box VAT return submitted the normal way, using the margin totals across the period as one of its inputs. What Mobile POS handles is getting the invoice right at the point of sale and keeping the purchase-to-sale record intact so that figure is defensible later — see how the same purchase record underpins IMEI-level stock tracking from intake through to resale.