Global Accounting calculates VAT from eligible sales and purchases across a VAT period. At the 20% rate, VAT is one-sixth of a positive VAT-inclusive margin. A net marketplace payout and your accounting profit are different figures. Check eligibility before using the calculation.
What is the Global Accounting Scheme?
It is a simplified VAT margin scheme for eligible low-value goods sold in volume. The standard margin scheme follows individual items; Global Accounting pools qualifying transactions for each VAT period. The word “global” refers to that combined calculation, not permission to include every overseas purchase or sale.
This guide illustrates domestic transactions at the 20% VAT rate. Establish the right scheme for your goods and purchasing route before applying it.
Which goods qualify, and what is the £500 limit?
Margin schemes cover qualifying second-hand goods, works of art, antiques and certain collectors’ items. Something being collectable does not, by itself, make it an eligible collectors’ item. New retail stock is not automatically eligible. Under the ordinary scheme rules used here, goods bought on an invoice showing VAT separately are excluded. An invoice without separate VAT does not, by itself, prove eligibility.
The general Global Accounting limit is a purchase price of £500 or less per item. A bulk invoice can exceed £500, but that does not let an expensive individual item pass the limit. Splitting a collection for resale and reselling an intact set can produce different outcomes; document what was actually bought and sold.
Fictional example: a £720 purchase of twelve separately resalable used ornaments is supported at £60 each. The batch total alone does not disqualify it. A single ornament costing £720 falls outside Global Accounting; the ordinary item-by-item margin scheme may still be available if its conditions are met. Do not allocate a flat average where the items have materially different values.
Imported goods and mixed VAT treatments need their own eligibility review. Keep them outside this simple example until the purchasing route and applicable rules are established.
How do you calculate VAT on the global margin?
Fictional example: a VAT-registered reseller has only qualifying domestic transactions in this calculation. Every item meets the scheme conditions. There is no opening negative margin, no stock introduced on joining, and no refunds or other adjustments. The sales figure is the customer selling value, before the platform deducts its charges.
The VAT-inclusive margin is £3,600. Dividing it by six gives £600 VAT. Multiplying it by 20% would give £720 and would calculate tax on an amount that already includes VAT.
(£9,600 − £6,000) ÷ 6
= £600 VAT| Calculation | Amount |
|---|---|
| Eligible selling value | £9,600 |
| Less eligible purchase value | £6,000 |
| VAT-inclusive global margin | £3,600 |
| VAT: £3,600 ÷ 6 | £600 |
| Margin after this VAT, before other business costs | £3,000 |
What happens if purchases exceed sales?
A negative global margin produces no margin-scheme VAT for that period. Carry the shortfall into the next period by adding it to the next purchase total. It is not an input VAT claim or a refund of one-sixth of the shortfall.
Fictional example: qualifying purchases of £5,400 exceed selling value of £4,200 by £1,200. The following period uses that £1,200 once, alongside £3,000 of fresh purchases. With selling value of £7,200, the resulting £3,000 positive margin gives £500 VAT.
(£7,200 − £3,000 − £1,200) ÷ 6
= £500 VAT| Calculation | First period | Next period |
|---|---|---|
| Eligible selling value | £4,200 | £7,200 |
| Fresh eligible purchases | £5,400 | £3,000 |
| Negative margin brought forward | £0 | £1,200 |
| Global margin | −£1,200 | £3,000 |
| VAT at the 20% rate | £0 | £500 |
| Negative margin carried forward | £1,200 | £0 |
Can you use the marketplace payout as sales?
Start from the customer transaction records and explain how they become a settlement. Net bank receipts can already have fees, refunds, reserves or other deductions taken out. They can also cover another reporting period.
Fictional example: an ordinary direct seller pays a separate marketplace service fee. Customer selling value is £9,600, the fee is £480, and £9,120 reaches the bank. The £480 explains the payout difference; it does not turn the selling value into £9,120. Adding that service fee to eligible goods purchases would also confuse two different types of cost.
Overheads and repairs do not form part of the margin-scheme purchase value. Any input VAT recovery on separate business costs follows the usual conditions and supporting invoices. Check auction and agency arrangements separately because the contractual role matters.
How do stock and year-end cut-off fit in?
Keep the stock valuation working and the VAT-period working side by side, with a bridge explaining their different purposes. A cost included in the global purchase record may relate to goods still held at year end. Replacing eligible purchases with the profit-and-loss cost-of-sales total can change the VAT calculation incorrectly.
For each disputed purchase or sale, retain the source document, relevant transaction dates, the period used, and the reason for that treatment. A later invoice upload or bank payout is evidence to investigate, not a reason to move every transaction into the later period. Do not assume accounting revenue recognition and VAT timing always coincide.
An accounting write-down in stock value is not automatically the same event as losing or destroying goods. For goods lost through breakage, theft or destruction, HMRC requires subtracting their original purchase price from the global purchase record. Keep the disposal evidence and adjustment separate from the valuation decision. Joining or leaving the scheme also requires a specific stock review.
What records should the reconciliation contain?
Keep distinct Global Accounting purchase, sales and calculation records, retaining the scheme records for six years. Invoices need meaningful goods descriptions and the prescribed party, date, reference and price details; sales invoices must not show VAT separately. Purchases from private individuals or unregistered businesses require a purchase invoice prepared by you. Follow HMRC’s full invoice requirements, rather than treating a marketplace bank reference as the invoice.
A useful working file should let another person reproduce the result. The following are practical controls to add around the required records:
- A transaction list with an eligibility decision and a link to the purchase or sale evidence.
- A mapping from every relevant sales channel to the combined VAT-period calculation, with repeated imports identified.
- A schedule of returns, exclusions and supported adjustments, plus any negative margin brought forward.
- A bridge to the ledger and VAT return, showing what is already recorded and what still needs review.
- A final version, an exception list and evidence of the next-period carry-forward being used once.
Which VAT return boxes are involved?
For the first fictional £9,600-sales example, the scheme contributes £600 to Box 1, £9,000 to Box 6 and £6,000 to Box 7. These are contributions to the return, not necessarily its complete totals. Other supplies, purchases and adjustments must still be included correctly.
Box 6 contains the selling value less VAT on the margin, not just the margin. Box 7 includes the eligible purchases actually bought in the period; a negative margin carried forward is not another fresh purchase. Margin-scheme purchases do not create a Box 4 input VAT claim. Eligible VAT on separately invoiced overheads is considered separately.
A ledger correction and a VAT return adjustment can travel through different software routes. Compare the final return with the working paper and check that a correction has not been applied twice.
Common questions
Is the global margin the same as gross profit?
No. The scheme pools eligible VAT-period transactions. Accounting gross profit depends on the applicable accounting basis, including stock movements. Overheads, VAT and timing can also make the figures differ.
Does every marketplace need its own Global Accounting calculation?
Keep channel reconciliations so you can trace the source figures, then combine the eligible activity into the business’s Global Accounting calculation. A channel report is a supporting schedule, not a substitute for the complete VAT-period working.