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Margin scheme goods.
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126.—The Principal Act is hereby amended by the insertion of the following section after section 10:
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“10A.—(1) In this section—
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‘antiques’ means any of the goods specified in paragraph (xvia) of the Sixth Schedule or in paragraph (iii) of the Eighth Schedule;
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‘collectors' items’ means any of the goods specified in paragraph (ii) of the Eighth Schedule;
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‘margin scheme’ means the special arrangements for the taxation of supplies of margin scheme goods;
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‘margin scheme goods’ means any works of art, collectors' items, antiques or second-hand goods supplied within the Community to a taxable dealer—
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(a) by a person, other than a person referred to in paragraph (c), who was not entitled to deduct, under section 12, any tax in respect of that person's purchase, intra-Community acquisition or importation of those goods:
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Provided that person is not a taxable person who acquired those goods from—
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(i) a taxable dealer who applied the margin scheme to the supply of those goods to that taxable person, or
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(ii) an auctioneer within the meaning of section 10B who applied the auction scheme within the meaning of section 10B to the supply of those goods to that taxable person,
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or
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(b) by a person in another Member State who was not entitled to deduct, under the provisions implementing Article 17 of Council Directive No. 77/388/EEC of 17 May 1977, in that Member State, any value-added tax referred to in that Directive in respect of that person's purchase, intra-Community acquisition or importation of those goods, or
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(c) by another taxable dealer who has applied the margin scheme to the supply of those goods or applied the provisions implementing Article 26a (inserted by Council Directive No. 94/5/EC of 14 February 1994) of Council Directive No. 77/388/EEC of 17 May 1977, in another Member State to the supply of those goods;
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‘precious metals’ means silver (including silver plated with gold or platinum), gold (including gold plated with platinum), and platinum, and all items which contain any of these metals when the consideration for the supply does not exceed the open market price, as defined in section 10, of the metal concerned;
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‘precious stones’ means diamonds, rubies, sapphires and emeralds, whether cut or uncut, when they are not mounted, set or strung;
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‘profit margin’ means the profit margin in respect of a supply by a taxable dealer of margin scheme goods and shall be deemed to be inclusive of tax and shall be an amount which is equal to the difference between the taxable dealer's selling price for those goods and the taxable dealer's purchase price for those goods:
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Provided that, in respect of that supply, where the purchase price is greater than the selling price, the profit margin shall be deemed to be nil;
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‘purchase price’, in relation to an acquisition of margin scheme goods, means the total consideration including all taxes, commissions, costs and charges whatsoever, payable by a taxable dealer to the person from whom that taxable dealer acquired those goods;
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‘second-hand goods’ means any tangible movable goods which are suitable for further use either as they are or after repair, other than means of transport, works of art, collectors' items, antiques, precious metals and precious stones;
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‘selling price’ means the total consideration which a taxable dealer becomes entitled to receive in respect of or in relation to a supply of margin scheme goods including all taxes, commissions, costs and charges whatsoever and value-added tax, if any, payable in respect of the supply;
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‘taxable dealer’ means a taxable person who in the course or furtherance of business, whether acting on that person's own behalf, or on behalf of another person pursuant to a contract under which commission is payable on purchase or sale, purchases or acquires margin scheme goods or the goods referred to in paragraphs (b) and (c) of subsection (4), with a view to resale, or imports the goods referred to in paragraph (a) of subsection (4), with a view to resale, and a person in another Member State shall be deemed to be a taxable dealer where, in similar circumstances, that person would be a taxable dealer in the State under this section;
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‘works of art’ means any of the goods specified in paragraph (xvi), or subparagraph (a) of paragraph (xxii), of the Sixth Schedule or in paragraph (i) of the Eighth Schedule.
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(2) Subject to and in accordance with the provisions of this section, a taxable dealer may apply the margin scheme to a supply of margin scheme goods.
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(3) Where the margin scheme is applied to a supply of goods, then notwithstanding section 10, the amount on which tax is chargeable by virtue of section 2 (1) (a) on that supply shall be the profit margin less the amount of tax included in the profit margin.
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(4) Subject to such conditions (if any) as may be specified in regulations, a taxable dealer may, notwithstanding subsection (2), opt to apply the margin scheme to all that dealer's supplies of any of the following as if they were margin scheme goods—
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(a) a work of art, collector's item or antique which the taxable dealer imported, or
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(b) a work of art which has been supplied to the taxable dealer by its creator or the creator's successors in title, or
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(c) a work of art which has been supplied to the taxable dealer by a taxable person other than a taxable dealer, where the supply to that dealer is of the type referred to in section 11 (1AA) (b) (ii):
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Provided that where a taxable dealer so opts in accordance with this subsection, such option shall be for a period of not less than two years from the date when such option was exercised.
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(5) Where a taxable dealer exercises the option in accordance with subsection (4), in respect of the goods specified at paragraph (a) thereto, then notwithstanding the definition of purchase price in subsection (1), the purchase price for the purposes of determining the profit margin in relation to a supply of those goods shall be an amount equal to the value of those goods for the purposes of importation determined in accordance with section 15 increased by the amount of any tax payable in respect of the importation of those goods.
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(6) Subject to subsection (7) and notwithstanding section 12, a taxable dealer who exercises the option in respect of the supply of the goods specified in subsection (4) shall not be entitled to deduct any tax in respect of the purchase or importation of those goods.
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(7) Where a taxable dealer exercises the option in accordance with subsection (4), that dealer may, notwithstanding the proviso to subsection (4), in respect of any individual supply of the goods specified in subsection (4), opt not to apply the margin scheme to that supply, and in such case the right to deduction of the tax charged on the purchase, intra-Community acquisition or importation of those goods shall, notwithstanding section 12, arise only in the taxable period in which the dealer supplies those goods.
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(8) (a) Notwithstanding subsection (3), and subject to and in accordance with regulations (if any)—
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(i) where a taxable dealer acquires low value margin scheme goods in job lots or otherwise, the amount of tax due and payable in respect of that dealer's supplies of low value margin scheme goods shall, in respect of a taxable period, be the amount of tax included in that dealer's aggregate margin, or margins, for that period and the amount of tax in each aggregate margin shall be determined by the formula:
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where—
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A is the aggregate margin for the taxable period in question, and
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B is the percentage rate of tax chargeable in relation to the supply of those goods, and
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(ii) where the taxable dealer referred to in paragraph (i) in any taxable period makes supplies which are subject to different rates of tax, that taxable dealer shall calculate separate aggregate margins for that taxable period in respect of the supplies at each of the relevant rates.
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(b) Subject to, and in accordance with regulations (if any), where a taxable dealer supplies a low value margin scheme good for an amount in excess of £500 then—
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(i) notwithstanding the definition of low value margin scheme goods in paragraph (c), the supply of that good shall be deemed not to be a supply of a low value margin scheme good,
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(ii) in determining the aggregate margin for the taxable period in which the supply occurs, the taxable dealer shall deduct the purchase price of that good from the sum of the taxable dealer's purchase prices of low value margin scheme goods for that period, and
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(iii) the purchase price of that good shall be used in determining the profit margin in relation to the supply of that good.
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(c) In this subsection—
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‘aggregate margin’, in respect of a taxable period, means an amount which is equal to the difference between the taxable dealer's total turnover in that period from supplies of low value margin scheme goods, to which the same rate of tax applies, less the sum of that taxable dealer's purchase prices of low value margin scheme goods to which that rate of tax applies to the supply thereof, in that taxable period:
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Provided that where the sum of that dealer's said purchase prices is in excess of the said total turnover, the appropriate aggregate margin shall be deemed to be nil and subject to, and in accordance with, regulations (if any), the amount of the excess shall be carried forward and added to the sum of that dealer's purchase prices for low value margin scheme goods for the purposes of calculating that dealer's appropriate aggregate margin for the immediately following taxable period;
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‘low value margin scheme goods’ means margin scheme goods where the purchase price payable by the dealer for each individual item is less than £500.
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(9) Notwithstanding section 17, a taxable dealer shall not, in relation to any supply to which the margin scheme has been applied, indicate separately the amount of tax chargeable in respect of the supply on any invoice or other document in lieu thereof issued in accordance with that section.
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(10) Where the margin scheme is applied to a supply of goods dispatched or transported from the State to a person registered for value-added tax in another Member State, then notwithstanding paragraph (i)(b) of the Second Schedule, the provisions of section 11 (1) (b) shall not apply, unless such goods are of a kind specified elsewhere in the Second Schedule.
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(11) Notwithstanding section 3 (6) (d), where the margin scheme is applied to a supply of goods dispatched or transported, the place of supply of those goods shall be deemed to be the place where the dispatch or transportation begins.
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(12) Where a taxable dealer applies the margin scheme to a supply of goods on behalf of another person pursuant to a contract under which commission is payable on purchase or sale, the goods shall be deemed to have been supplied by that other person to the taxable dealer when the said taxable dealer supplies those goods.
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(13) Notwithstanding paragraph (xxiv) of the First Schedule, where a taxable person acquires goods to which the margin scheme has been applied and that person subsequently supplies those goods, the provisions of that paragraph shall not apply to that supply.”.
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