The short answer
- Only once your sales go over £90,000 in any 12 months in a row.
- That's £90,000 of sales, not profit, which matters for resellers.
- If you do get there, the margin scheme lets you pay VAT on your margin rather than the whole sale price of second-hand goods.
The threshold is about sales, not profit
You have to register for VAT when your VAT taxable turnover goes over £90,000. Turnover here is the total value of everything you sell, not what's left after buying the stock.
That's the trap for resellers. If you buy at £10 and sell at £20, you reach £90,000 of turnover when you've made about £45,000 of margin, and well before that in profit once fees and postage come off.
It's any 12 months, not the tax year
The test is a rolling one. At the end of every month, add up your sales for the last 12 months. If that goes over £90,000, you have to register within 30 days of the end of that month.
There's a second test looking forward: if you expect your sales in the next 30 days alone to go over £90,000, you have to register by the end of those 30 days. That's rare for resellers, but it catches anyone who lands a big bulk deal.
Register late and you have to pay VAT on the sales you made from the date you should have registered, and there may be a penalty on top.
The margin scheme for second-hand goods
Once registered, normal VAT is charged on the full sale price. For second-hand goods there's an alternative: a margin scheme, where you pay VAT only on the difference between what you paid for an item and what you sold it for. The VAT is one-sixth of that margin.
HMRC's example: buy for £1,500, sell for £2,000, and the margin is £500, so the VAT is £83.33. On the same sale under normal VAT you'd be accounting for VAT on the full £2,000.
You can't use it for anything you were charged VAT on when you bought it, and it needs proper records for every item. Check HMRC's eligibility rules before relying on it.
Can you register before you have to?
Yes. Voluntary registration is allowed below £90,000. For most resellers selling to the public it isn't worth it, because it adds VAT to what your buyers pay or comes out of your margin. And if your sales later drop below £88,000, you can ask to cancel your registration.
Where STC fits in
Because the test is rolling, it's worth glancing at your last 12 months now and then. On STC's Tax screen, set the dates to the last 12 months and the revenue figure is your turnover for the test. The margin scheme's per-item records are also exactly what STC keeps: what each item cost and what it sold for.