VAT and the Margin Scheme

[Brendan Burgess]

I am trying to get my head around the margin scheme and how it affects works bought and sold at auction.

My understanding of it is that an auction house can register for the margin scheme. If they do, they charge their customers VAT on the margin, which presumably is the commission in the case of an auction house.

But if they charge VAT on the Margin Scheme, then the buyer cannot reclaim it whether they are registered for VAT or not.

But does the Margin Scheme apply to all the sales of the auction house?

For example, if they sell a painting for a hammer price of €10,000 with commission of €2,000, they charge VAT on the €2,000 and the VAT registered buyer, can't reclaim it.

But then let's say that they charge the buyer €1,000 for shipping. They charge VAT on the shipping. Is the shipping also covered by the margin scheme? In other words, the buyer has to pay the VAT whether they are registered for VAT or not and can't reclaim it.

So in summary, does the margin scheme apply to all sales by the auction house or just to the sales of artworks?

Brendan