VAT on second hand van

jamie1976uk

hi all,

not sure if this should come under the 'motoring'  or 'Taxes' section 

im looking to buy a second hand van for personal use. I've seen one in my local ford dealers advertised for £21k+VAT(£25,200 inc VAT). looking on gov.uk  I've found theres something called 'the VAT margin scheme'? i might have got this totally wrong, but it seems to be where you only pay VAT on dealers profit from the sale of the vehicle(ie the difference between the price they bought it for and the price they are selling it for). so if the dealer paid 15k for and selling it for 21k I'd only pay £1000 VAT(the gov website says 1/6 of the dealers profit) saving me £3000. have I got that totally wrong? or is it only if its being purchased for business use? if its correct, do I just need to ask the dealer to put the sale through that way?

thanks for any info

AdrianC

If the original owner of the vehicle was a VAT reg business, and reclaimed the VAT, then VAT is charged on the full amount when they sell it.

If you buy it used, and are VAT reg, then you can reclaim that VAT, too. That chain continues throughout the vehicle's life, until it gets broken by a buyer not reclaiming. Thereafter, it's never "VAT qualifying" again, and the trader's margin scheme would kick in.

So for a VAT-reg business, this van would cost £21k. They'd pay the VAT, then reclaim it, then charge it when they sell it.
For you, it costs £25.2k, because you can't reclaim the VAT.

neilmcl

AFAIK if the vehicle is VAT qualifying then they will charge the full rate, the margin scheme is only applicable to non-qualifying vehicles, ie, no VAT was claimable when the dealer purchased the vehicle.

facade

If the dealer bought the vehicle with a VAT invoice, and claimed the VAT back, then they can't use the margin scheme, VAT is chargeable @ 20% of sale price- again you get a VAT invoice, and you claim the VAT back (if it is for business use)

The margin scheme applies once the chain of VAT registered owners claiming the VAT back breaks.

So if you are not VAT registered, and you then sell it to another dealer, no VAT is paid on the sale, but when they mark it up and sell, VAT is paid on the mark up (margin).

Basically, somebody has to actually pay the VAT on the vehicle and let HMRC keep the money- once

Castle

The VAT margin scheme would only apply if no vat was charged when the dealer bought it;-
https://www.gov.uk/guidance/the-margin-scheme-on-second-hand-cars-and-other-vehicles-vat-notice-7181

jamie1976uk

ah thought that seems too good to be true