How to Prepare for Tax Season as a Reseller: A Step-by-Step Accounting Checklist

For many second-hand businesses, tax season creeps up quietly until you realise it's two weeks to the deadline and your records are scattered across notebooks, emails, and maybe dusty Excel sheets.

If you sell used cars, pre-owned watches, or vintage jewellery, preparing for tax season is about staying in control of your business numbers before HMRC comes asking for them.

This post gives you a simple, step-by-step accounting checklist to help you prep like a pro, even if you’ve left it a little late. If you're under the VAT Margin Scheme, there are a few additional things to consider, which we’ll cover as well.

How to Prepare for Tax Season as a Reseller

How to Prepare for Tax Season as a Reseller

Gathering all sales and purchase records (Margin Scheme or not)

Before anything else, tax season prep starts with paperwork. 

If your records are scattered or incomplete, nothing else will add up properly. For second-hand businesses, that means collecting every document related to the items you bought and sold during the tax year.

What to gather:

  • Sales invoices: Include buyer info, item descriptions, sale prices, and whether it was a Margin Scheme sale

  • Purchase records: Especially important if you bought from private sellers. Include names, dates, and prices paid

  • Proof of payment: Bank statements, cash receipts, or digital transfers that back up your transactions

  • Returns or refunds: If an item was returned or discounted, that needs to be recorded too

If you’ve been using the VAT Margin Scheme, make sure your purchase and sale records for each item are matched and traceable, you haven’t reclaimed input VAT on goods sold under the scheme, and the word “Margin Scheme” appears on your eligible invoices.

HMRC requires resale businesses to keep detailed records under the Margin Scheme. You can review the official record-keeping requirements here: VAT margin schemes

Tip: Start a digital folder for this tax year right now, even if the deadline is months away. The less chasing you have to do later, the better.

Reconcile your inventory and Cost of Goods Sold (COGS)

Your sales might look strong on paper, but if your stock records don’t match or you’re guessing what an item costs to sell, then you’re flying blind when it comes to actual profit.

Reconciliation means checking that:

  • Every item sold during the year was recorded properly

  • Its original cost (plus any resale prep like repairs or packaging) is accounted for

  • Any unsold stock is still listed as inventory, not included in COGS

For example, if you're a used car dealer, make sure you’ve logged the purchase price of each car sold, plus any refurbishments or upgrades done before the sale. If you're a jeweller, include polishing, resizing, or reboxing costs where relevant.

Check VAT return accuracy and Margin Scheme compliance

If you’ve been using the VAT Margin Scheme, tax season is the perfect time to take a step back and make sure everything you’ve submitted holds up. 

It’s surprisingly easy to make small mistakes, especially if you’re calculating margins manually or mixing up standard and margin-rated goods.

  • Were only eligible items included in the scheme?
    Not all second-hand goods qualify. Items bought from VAT-registered businesses, or those with input VAT reclaimed, shouldn’t be reported under the Margin Scheme.

  • Were margins calculated correctly?
    The margin should be the selling price minus the purchase price, excluding VAT. Charging VAT on the full sale price instead is one of the most common mistakes.

  • Were sales and purchase records linked properly?
    Each margin sale must be backed up by a clear purchase record for that exact item. If you can’t trace it, HMRC could reject your VAT claim.

  • Were you consistent?
    Switching back and forth between VAT methods on the same type of goods is a red flag for HMRC, especially without a clear justification.

If you notice any gaps or errors, don’t panic. HMRC does allow for corrections, especially if you fix them before they find them. 

You can read their official guide on correcting VAT mistakes here:
https://www.gov.uk/government/publications/vat-notice-70045-how-to-correct-vat-errors

Tip: Keep a separate digital file for each VAT quarter so you can track what’s been filed and what’s still open. And if you’re unsure whether something qualifies under the scheme, it’s better to double-check than guess.

VAT return accuracy

VAT return accuracy

Prepare and review key year-end financial reports

Once your records are tidy and your VAT position is clear, the final step is to pull together your year-end reports. 

These are the documents that give you (and your accountant) the full picture of how your business performed.

  • Profit & Loss (P&L) Statement
    Shows your income, COGS, and business expenses across the year. This helps determine your taxable profit and shows if you’re actually making money after all costs.

  • VAT Summary Report
    A breakdown of all VAT collected and paid throughout the year, including Margin Scheme adjustments. This makes it easier to cross-check against your submitted returns.

  • Balance Sheet
    A snapshot of your business at year-end: stock on hand, cash in the bank, liabilities (like tax owed), and assets. This matters for financial planning and funding conversations if you’re looking to grow.

  • Accounts Receivable / Payable (if applicable)
    Outstanding invoices or debts still owed at year-end should be recorded clearly, especially if you’ve extended credit to customers or paid suppliers in instalments.

If you don’t use accounting software, your accountant can still help you generate these reports from your raw records. The key is to keep things clean and consistent throughout the year to not be in panic mode at the end.

Conclusion

With the right checklist and a bit of monthly discipline, tax season doesn’t have to be stressful.  You can go into every year-end feeling organised, confident, and in control.

Whether you deal in vintage jewellery, used cars, or pre-owned designer pieces, your business is only as strong as your numbers. 

Preparing early means fewer surprises, cleaner records, and better decisions. And if you're unsure where to start or just need a second set of eyes, Rhombus Accounting is here to help. 

At Rhombus Accounting Firm, we work with resale businesses across the UK to make VAT, year-end reporting, and tax planning less of a headache and more of a strength.

Thanks for reading!

Meet Lewis

Lewis is a professional accountant and the founder of Rhombus Accounting. He regularly shares his knowledge and best advice here on his blog and on other channels such as LinkedIn.


Book a call today to learn more about what Lewis and Rhombus Accounting can do for you.

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