Inventory lost & found/SH margin scheme

JohnFPalmer97

I work in a small engineering firm that operates on the second-hand margin scheme. It hasn't had a serious stock take in almost 25 years of trading, so over August we did a full inventory of the second hand stock.

In that stock take, we've found around £30,000 of missing stock (valued at purchase price). However, we've also found a substantial amount of stock that wasn't recorded in the first place.

According to the second-hand margin scheme, we have to keep individual records of every item we sell under the scheme including the price paid and the price sold for.

For an example, say we have stock item A and stock item B. Stock item A is recorded as having been bought for £100 in 2010, but has gone missing in the stock take. Stock item B is not recorded on the books, but could be sold for £110.

I think that, under the rules of the margin scheme, we have to write off item A as a loss, then record the sale of item B with a margin of £110 (paying £18.33 of VAT under the scheme).

That seems to follow the letter of the scheme and makes sense on each individual item, but doesn't make sense on the bottom line - we spent £100 on inventory, sold off that inventory for £110, but the £18.33 of VAT means we make a loss.

Is there any mechanism by which we would be able to offset the lost stock against the found stock?