Some VAT-registered traders buy goods in the UK from unregistered persons (e.g. the general public) and so have little input tax. If the traders sell on the goods to such persons, then they could save VAT by selling the goods as an agent, rather than as a principal.

Example: Selling as agent or principal

A VAT-registered trader deals in goods for which the second-hand goods scheme is unavailable. He decides that an item can be sold for £1,200. If he buys and sells it as a principal, then his profit is as follows (assuming that the standard rate of 20% applies to all transactions):


Sale price to customer


Less: output tax (1/6 × £1,200)

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