You must keep a stock book to be able to operate the standard VAT Margin scheme, which references each item, it’s purchase price and sale price. You must be able to track an item from purchase through to sale.
Sales invoices for goods sold on the VAT margin scheme must state that a margin scheme has been applied.
If you cannot meet all the record keeping conditions, then you cannot use a VAT margin scheme – even if the goods you sell are eligible. You would then have to apply standard VAT accounting and charge VAT on the entire sale price.
More rules
There are also specific rules for particular trades and sectors (eg for agents, horses & ponies, motor vehicles / second hand car dealers, pawn-brokers, shares, imports and exports)
And there are also special VAT Margin schemes: VAT Auctioneers Scheme and VAT Global Accounting (which is a simplified version of the Standard VAT Margin Scheme and works for buying and selling in low value, bulk/volume. This does not require a detailed itemised stockbook)
To read the HMRC overview on VAT Margin Schemes click here.
To read the HMRC VAT Margin Scheme manual (number 718) for VAT Margin Schemes, click here.
