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Hello, I’m Sara, a Chartered Accountant who transitioned into running an online business. I understand just how daunting and confusing it can be to take the leap into self-employment. The questions, the uncertainties, and the steep learning curve are all challenges I’ve faced myself. Whether you’re in the early stages of planning to go self-employed, just dipping your toes into making money on your own terms, or already fully committed, this blog is dedicated to helping you every step of the way. Through detailed guides, expert tips, and practical advice, I aim to be your go-to resource. From mastering financial management and navigating tax obligations to setting up the foundations of your business, I’m here to provide you with the clarity and confidence you need to thrive in your self-employment journey.
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Self-Employed Tax Explained
Invoicing and Record-Keeping for the VAT Margin Scheme
Invoicing and record-keeping are crucial for any VAT-registered business. However, for businesses operating under the VAT Margin Scheme, additional record-keeping requirements and specific invoicing details are necessary. This guide outlines the key rules and regulations for second-hand businesses under the VAT Margin Scheme.
Table of Contents
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Record-Keeping for the VAT Margin Scheme
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VAT Margin Scheme Stock Book
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Margin Scheme Purchase Invoices
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Margin Scheme Sales Invoices
1. Record-Keeping for the VAT Margin Scheme
All VAT-registered businesses must maintain comprehensive records for preparing accounts, taxes, and VAT returns. For businesses using the VAT Margin Scheme, it is essential to keep two sets of records:
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Standard VAT record-keeping
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Margin scheme-specific record-keeping
Record-keeping involves logging transactions and storing paperwork. VAT records must be retained for 6 years, either digitally or as hard copies.
For those using the margin scheme, the following additional records are required:
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A detailed stock book tracking each item sold under the scheme
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Custom purchase invoices
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Specific details on sales invoices
2. VAT Margin Scheme Stock Book
The VAT Margin Scheme Stock Book is vital for tracking items sold under the scheme. It is crucial for compliance and will be requested by HMRC during a VAT investigation. Without this book, you might need to adjust your returns to align with the Standard VAT Scheme, potentially incurring additional costs.
Your stock book should include:
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Item description
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Date of purchase
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Purchase price
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Selling price
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Any relevant stock book numbers
3. Margin Scheme Purchase Invoices
When operating under the margin scheme, you may purchase items from individuals who are not VAT-registered and may not provide a purchase invoice. To comply with VAT requirements, you need to create your own purchase invoices, which must include:
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The seller’s name and address
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Your name and address
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A reference linking the invoice to your stock book, such as a stock book number
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Invoice number (if applicable)
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Date of transaction
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Description of the item
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Total price (without additional costs)
4. Margin Scheme Sales Invoices
Under the VAT Margin Scheme, you do not need to itemize VAT separately on your sales invoices. However, your invoices should include:
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Your name, address, and VAT registration number
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The buyer’s name and address
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A reference linking the invoice to your stock book, such as a stock book number
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Invoice number
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Date of transaction
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Description of the item
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A statement disclosing the use of the VAT Margin Scheme, such as "Second Hand Goods Margin Scheme"