Can I use the Margin Scheme on a part-exchange handset?

• The part-exchange allowance is the purchase price for margin purposes.
• Record it as a purchase in its own right, not just a discount.
• The onward sale of that handset is a separate transaction with its own margin.
• The new item you sold alongside it follows its own normal VAT treatment.

Two transactions, not one discount

A part exchange looks like a single deal across the counter, but for VAT it is two: you sold a handset, and you bought one. Treating the trade-in as a discount on the sale loses the purchase price of the incoming phone, and without that you cannot compute a margin when you sell it on.

So if you sell a handset for £400 and allow £150 for the customer’s old one, you have a £400 sale under its own VAT rules and a £150 purchase of second-hand stock. The customer hands over £250.

Valuing the allowance honestly

The allowance has to be a genuine value for the incoming handset, because it becomes your cost for the margin calculation. Inflating it to make the headline deal look better reduces your recorded margin on the resale, and understating it does the opposite.

If the trade-in is worth less than you allowed as a goodwill gesture, that is a commercial decision — but the figure you record should be the figure you actually gave.

What to capture at the counter

You need enough to evidence the purchase later: who you bought from, when, what the handset is, and what you paid. The IMEI ties it to the specific unit so the eventual sale can be matched back to this purchase.

Mobile POS records a part exchange as a trade-in purchase against the seller and turns it into IMEI-tracked stock, with the allowance carried through as the cost — so the margin on the resale is calculated from what you actually gave, not reconstructed from memory.