The second-hand goods scheme aims to cut the VAT bill by allowing output tax to be calculated on the margin made on the sale. For example, if a trader buys an item for £30 and sells it for £100, then the output tax using the ‘VAT fraction’ (¶18-018) is due on £70 rather than the £100 sale price.

The second-hand goods scheme covers the sale of most second-hand goods – provided that input tax has not been incurred on their purchase. VAT is accounted for only on any profit margin – the difference between the sale and purchase prices.

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