VAT Margin Scheme for Horses Explained

Then the second-hand margin scheme could work out to be financially beneficial for your business if you buy and sell second-hand horses and are facing, or already are, VAT registered. 

Who Needs to Register for VAT

Currently, all businesses with a taxable turnover of £85,000 or more (2019/2020) need to register for VAT.

Need to Register for VAT? Do it Online.

How Does the VAT Margin Scheme for Horses Work

Normally a VAT registered business will reclaim VAT on everything they purchase and add VAT To everything they sell.

This is fine if they buy and sell goods to/from other VAT registered businesses.

However, when you operate a second-hand goods business, you may be buying & selling used goods to & from individuals who are probably not VAT registered.

This means that as your business reaches VAT registration, you’ll face two challenges if you buy and sell from the general public:

  • Adding VAT to your sales price making you uncompetitive in the marketplace;
  • Taking VAT out from your sales price which erodes your margins all because you have had reached the VAT registration threshold.

The VAT Margin Scheme can really benefit business affected by the above challenges.

Under the rules of the Scheme, you pay VAT at 16.67% (1/6th) of the difference between what you bought the item for and what you sold it for. Rather than the standard rate of 20% on the sales price.

Read More: VAT Margin Scheme

An Example of the VAT Margin Scheme for Horses

You buy & sell horses and buy a horse for £15,000 from an individual (not VAT registered), then sell it for £25,000 to another individual (also not VAT registered). 

Using the VAT margin scheme, you will pay VAT on the difference between you bought & sold the horse at, £10,000. 

Therefore you will pay VAT of £1,666.67.

If you were using the Standard VAT Scheme you would have had to either increase your selling price to £30,000 to cover VAT, making you potentially uncompetitive or take VAT of £4,166.67 out of your selling price.

As you can see, the VAT margin scheme is very beneficial to second-hand businesses who sell to individuals.

How to Join the Second-Hand Margin Scheme

You don’t actually need to register to use the Second Hand Margin Scheme, you just start using it. 

That being said, it is your responsibility to make sure you are eligible to use the scheme so it is advisable to seek professional advice before you adopt it.

Second-Hand Horses Only!

A horse or pony which was owned previously by someone else is classified as second hand. 

You cannot include horses which you have bred yourself and are selling for the first time.

Regardless of how much work or expense you have put into preparing it for sale.

Read More: How ‘Second-Hand’ Puppies Became the Victims of a VAT Investigation


If you deal in second-hand horses you must make sure that every time you sell a horse that you wish to include in the Second-Hand Scheme you include the following information on sales invoices, purchases invoice and your stock book including:

  • unique identifying passport number
  • colour
  • sex
  • type or breed (for example, cob or thoroughbred)
  • age (if known)
  • height
  • stable name (if known), and
  • distinctive markings

Updated 15 April 2019

About Anita Forrest

Anita Forrest is a Chartered Accountant, spreadsheet geek, money nerd and creator of www.goselfemployed.co - the UK small business finance blog for the self-employed community. Here she shares simple, straight-forward guides to make self-employment topics like taxes, bookkeeping and banking easy to understand.