VAT – Second-hand cars – using the Margin Scheme

If you sell second-hand vehicles and you were not charged VAT when you purchased the vehicle, using the Margin Scheme will save you money.

If you did not use the VAT Margin Scheme, you would have to account for VAT on the full selling price of each vehicle. However, if you use the Margin Scheme, you can account for VAT on the difference between the price you paid for a second-hand vehicle and the sales price when you sell the car.

If you sell a vehicle for less than you paid for it, you will not have to account for any VAT on the sale.

You do not have to use the Margin Scheme, it is optional.

If you decide to use it, there are conditions you will have to meet. If you cannot meet all the conditions, you cannot use the scheme.

The main conditions published by HMRC are:

  • the vehicles must be eligible,
  • you must have acquired the vehicles in eligible circumstances – in most cases, this means that you have obtained eligible vehicles for resale in circumstances where VAT was not chargeable,
  • you must calculate the margin in accordance with the rules of the scheme, there are special rules about how to calculate your buying price, your selling price and your margin under the scheme, your margin may not be the same as your profit margin,
  • you must meet the record-keeping rules of the scheme, there are special rules about invoicing and stock records.
Latest Blog
02
Dec

Tax Diary December 2021/January 2022

1 December 2021 – Due date for corporation tax payable for the year ended 28 Fe...

Read More
02
Dec

Budget bad news 27 October 2021

Readers should take note of the following changes: Income Tax Allowances frozen: The ...

Read More
02
Dec

Budget bonuses 27 October 2021

There was little good cheer in the Chancellor’s announcements to parliament on ...

Read More
02
Dec

Business gifts and tax

Business gifts are not allowed as a tax deduction against profits. The legislation tr...

Read More

CONTACT SIMON COOPER