Margin Scheme Taxation
Also: margin taxation, second-hand margin scheme, differential taxation
The margin scheme is a special VAT arrangement under which a dealer charges tax only on the trading margin (the difference between purchase and resale price) rather than on the full selling price.
The margin scheme is a special VAT arrangement covering the resale of second-hand goods, works of art, antiques and collectors' items. In the precious-metals trade it matters above all when dealers buy and resell silver coins, collector coins and scrap-silver items that do not qualify for VAT exemption. Instead of charging full VAT on the gross selling price, the dealer accounts for tax only on the margin — the gap between what was paid and what the item resold for.
Note: this article is for general information only and is not a substitute for individual tax advice. Please consult a qualified adviser for your own situation. This is not tax advice.
Conditions for using the scheme
An Irish dealer may apply the margin scheme only when several conditions are met at once:
- The dealer acts as a taxable dealer (buying and reselling in the course of business).
- The goods were acquired from a private individual, from a business not entitled to deduct VAT (for example an exempt trader), or from another dealer who themselves used the margin scheme.
- The item is a movable, tangible good (coins, jewellery, second-hand bars — not brand-new stock).
- There was no deductible VAT charged to the dealer on the purchase.
Where the purchase invoice did show recoverable VAT (for instance a buy from another VAT-registered dealer applying normal rules), the margin scheme is not available.
The formula: tax on the margin only
Taxable amount = selling price − purchase price (= trading margin)
VAT = taxable amount × 23 % (standard Irish rate)
Important: the margin is a gross margin — the VAT is already contained within it. To back it out correctly:
VAT element = trading margin × (23 / 123)
Net margin = trading margin × (100 / 123)
If the margin is negative (selling price below purchase price), no VAT arises — and no VAT refund can be claimed either.
Normal VAT vs. the margin scheme
| Feature | Normal VAT rules | Margin scheme |
|---|---|---|
| Tax base | Full selling price (net) | Trading margin only (gross) |
| Invoice | VAT shown separately | No separate VAT shown |
| Buyer's input VAT | Deductible | Not deductible |
| Typical use case | New goods / B2B | Second-hand and collector market |
Why it matters for precious metals
Silver and collector coins
Unlike investment gold, silver carries the full standard Irish VAT rate of 23 %. When buying from private sellers (inherited pieces, old collector coins), a dealer can therefore use the margin scheme: they pay VAT not on the entire resale figure but only on their margin. That materially lowers the effective tax burden and lets them offer more competitive purchase prices.
Effect on the end customer
Because a dealer using the margin scheme may not show VAT separately, the buyer in turn cannot reclaim input VAT. For private buyers this is irrelevant; for businesses (jewellers acquiring collector coins as trading stock, say) the normal rules may work out better.
Where it stops: investment gold
Investment gold — bars and coins meeting the qualifying criteria — is exempt from VAT in Ireland under the VAT Consolidation Act 2010, Schedule 1 (implementing EU Directive 2006/112/EC, articles 344–356). The margin scheme simply does not come into play there.
For investment silver there is no comparable exemption, which is exactly why the margin scheme is the key tool for optimising tax in the second-hand silver market. Use our Tax Estimator together with the silver price to gauge the effective tax burden of your particular plan.
Records and obligations
Dealers using the margin scheme must:
- Keep purchase records in full (private sellers issue no invoice, so a self-generated purchase document is needed).
- Issue sales invoices without a separate VAT charge and note that the margin scheme applies.
- Maintain separate records for margin-scheme sales and normal-rated sales.
- Enter the taxable amount (net margin), not the gross turnover, in the VAT return.
Getting this wrong — applying the scheme where it does not apply, or failing to mark invoices correctly — can lead Revenue to assess the full standard-rate VAT.
In brief
The margin scheme is a central planning tool for dealers in precious metals and coins buying from the public: tax falls on the trading spread, not the whole selling price, which keeps the second-hand market for silver coins and collectibles commercially viable. Nothing changes for the private seller; a business buyer, however, loses the input-VAT deduction. This is not tax advice.