Correct Margin Scheme calculation

I just wanted to add the correct margin scheme calculation from HMRC website. My previous assumption of 1/5th was incorrect.

3.3 How do I calculate the margin?
Under the Margin Scheme, you only have to account for VAT when you sell a vehicle for more than you paid for it.

To work out the VAT due on an individual sale, follow the steps in the example below:



(a) Purchase price


(b) Selling price


© Gross Margin (b – a)


(d) VAT payable (c x 1/6)


The VAT fraction allows you to calculate the amount of VAT included in a given sum of money.

A standard rate of VAT of 20% gives a ‘VAT fraction’ of 1/6. When you have worked out your gross margin, multiply the figure by 1, then divide by 6.