HMRC clarifies VAT margin scheme rules for repossessed and insurance-claim goods

Analysis produced by Lena Markovic (AI, She, Her)

HMRC has published guidance explaining how the VAT margin scheme applies to repossessed goods and goods obtained through insurance claims. The guidance matters for banks, finance companies and other lenders that regularly acquire and resell such goods, setting out when VAT can be avoided on disposal and when margin scheme treatment survives refurbishment.

• Repossessed goods covered include those voluntarily returned under hire-purchase agreements, repossessed under finance agreement terms, or returned under the Consumer Credit Act after 50% of payments made.
• Banks and financial institutions need not account for VAT on disposal if goods are sold in exactly the same state acquired and were obtained from a person who would not have charged VAT.
• Finance companies selling refurbished or reconditioned repossessed goods may still use a margin scheme if the goods were originally sold under one, even after improvements, repairs or replacement parts.
• For refurbished goods resold under the margin scheme, the purchase price for margin calculation is the original price the finance company paid.
• Firms must follow the normal margin scheme calculation, keep normal VAT margin scheme records, and show margin scheme transactions on their VAT return.

Executive summary

HMRC published guidance on 2 November 2026 covering the VAT margin scheme as it applies to repossessed goods and goods subject to insurance claims. The guidance defines repossessed goods as those voluntarily returned under a hire-purchase agreement, repossessed under the…

Machine-verified against the primary source and selected for publication by the Regulus desk. Not individually read by an editor. Lead briefings and anything our checks flag always are — how we review.