If your business deals in second-hand goods, it can use a concession that significantly reduces your VAT payments compared to normal VAT accounting. Using this concession you account for the VAT on its profit margin on the second-hand goods, rather than on the full sales value.

The record-keeping requirements for using this concession are very strict, and you must distinguish between the goods which have had some prior use before you acquired them, and are thus treated as second-hand, and goods which are acquired new and unused.

Where your business buys second-hand goods for £500 or less, VAT can be accounted for using the global accounting scheme. This allows VAT to be paid on total sales less total purchases of all goods in a VAT period, rather than on an item by item basis.

This method of accounting allows losses made on some items to be automatically offset against profits made on other sales. If the global accounting scheme is not used, no VAT is payable on items sold at a loss, but the loss cannot be offset against profits on other sales.