The margin scheme: VAT on second-hand goods
Updated: July 2026
A used-car dealer who buys a car from a private seller gets no VAT invoice, because private individuals do not charge VAT. If the dealer then had to charge VAT on the full resale price, the same car would be taxed twice over its life. The margin scheme solves this: the dealer accounts for VAT only on the margin, the difference between what they paid and what they sold for. The scheme is optional and sits alongside the normal rules you can test on our VAT calculator.
Which goods qualify
Second-hand movable goods bought without a VAT invoice: typically stock bought from private individuals, from unregistered businesses, or from other dealers who themselves sold under the scheme. Used vehicles are the classic case, along with antiques, works of art and collectors' items, which have some special valuation rules of their own.
The arithmetic
The margin is treated as VAT-inclusive. You do not add VAT on top of the margin; you extract it from within.
Example: a dealer buys a hatchback from a private owner for €9,000 and sells it for €11,460. The margin is €2,460. The VAT inside that margin is 2,460 x 23 / 123 = €460, and the dealer keeps €2,000. Under normal rules the VAT would have been calculated on the full €11,460, which is the double-taxation problem the scheme exists to prevent. You can check the extraction step with the remove-VAT side of the calculator.
Invoicing and records
- Margin scheme invoices must not show a VAT amount, because the buyer has nothing to reclaim. The invoice carries a note such as "Margin scheme: second-hand goods. VAT not deductible".
- You must be able to show the purchase price and sale price for each item, so stock records matter more than under normal rules.
- The scheme is per-transaction optional. Selling to a VAT-registered buyer who wants a deductible invoice? You can apply normal rules to that sale and charge VAT on the full price instead.
- Losses on one item do not create a VAT refund, though the global accounting variant lets low-value dealers net margins across a period.
Open the calculator
Common questions
How is VAT calculated under the margin scheme?
VAT is calculated on the dealer's margin, the difference between purchase and sale price, and the margin is treated as VAT-inclusive. At the 23% standard rate the VAT is the margin multiplied by 23 and divided by 123.
Can the buyer reclaim VAT on a margin scheme purchase?
No. A margin scheme invoice must not show a separate VAT amount and the buyer has no input credit. Dealers can opt to apply normal VAT rules to a particular sale where the buyer needs a deductible VAT invoice.
Does the margin scheme apply to used cars in Ireland?
Yes, used vehicles bought as stock without a VAT invoice, typically from private sellers, are the most common margin scheme goods. Vehicle Registration Tax is separate from VAT and applies on its own rules.