VAT on Commercial Vehicles
Discussion
Quck question ,If someone or a company is not vat registered and buys a van new or second hand and pays vat on it then decides to sell obviously they can not claim the vat back . This means the revenue have financially gained .
If that commercial vehicle has been sold to some one or company like a van dealer who is vat registered should they be charging vat on the vehicle ?
Does the chain break once someone or a company does not claim the vat back ?
If that commercial vehicle has been sold to some one or company like a van dealer who is vat registered should they be charging vat on the vehicle ?
Does the chain break once someone or a company does not claim the vat back ?
SILICONEKID346HP said:
Quck question ,If someone or a company is not vat registered and buys a van new or second hand and pays vat on it then decides to sell obviously they can not claim the vat back . This means the revenue have financially gained .
If that commercial vehicle has been sold to some one or company like a van dealer who is vat registered should they be charging vat on the vehicle ?
Does the chain break once someone or a company does not claim the vat back ?
Who is 'they'? Do you mean the seller? Have a look at the definition ofIf that commercial vehicle has been sold to some one or company like a van dealer who is vat registered should they be charging vat on the vehicle ?
Does the chain break once someone or a company does not claim the vat back ?
Taxable supply - Section 2.3
Registered person - Section 3.6
http://customs.hmrc.gov.uk/channelsPortalWebApp/ch...
If you did mean the seller, the answer is no. If not registered for VAT, that person cannot claim back any Input Tax, nor can they charge Output Tax on any sale, irrespective of what the item is. Charging Output Tax on a sale in such circumstances could get you into serious trouble. You could be accused of collusion with the dealer for the latter to fraudulently reduce their VAT liability.
The dealer selling the vehicle on can take advantage of the Margin Scheme.
Section 2.4 - http://customs.hmrc.gov.uk/channelsPortalWebApp/ch...
Red Devil said:
Who is 'they'? Do you mean the seller? Have a look at the definition of
Taxable supply - Section 2.3
Registered person - Section 3.6
http://customs.hmrc.gov.uk/channelsPortalWebApp/ch...
If you did mean the seller, the answer is no. If not registered for VAT, that person cannot claim back any Input Tax, nor can they charge Output Tax on any sale, irrespective of what the item is. Charging Output Tax on a sale in such circumstances could get you into serious trouble. You could be accused of collusion with the dealer for the latter to fraudulently reduce their VAT liability.
The dealer selling the vehicle on can take advantage of the Margin Scheme.
Section 2.4 - http://customs.hmrc.gov.uk/channelsPortalWebApp/ch...
I am not vat registered so if I sell my van to a dealer or anyone vat registered should they sell the van with vat on it ? obviously the vat I paid on the vehicle is a loss .Taxable supply - Section 2.3
Registered person - Section 3.6
http://customs.hmrc.gov.uk/channelsPortalWebApp/ch...
If you did mean the seller, the answer is no. If not registered for VAT, that person cannot claim back any Input Tax, nor can they charge Output Tax on any sale, irrespective of what the item is. Charging Output Tax on a sale in such circumstances could get you into serious trouble. You could be accused of collusion with the dealer for the latter to fraudulently reduce their VAT liability.
The dealer selling the vehicle on can take advantage of the Margin Scheme.
Section 2.4 - http://customs.hmrc.gov.uk/channelsPortalWebApp/ch...
Upthejunction said:
You can't charge vat on something you haven't paid vat on.
You will see trucks advertised from traders some state that no extra vat is to be paid.
This is where they haven't paid it so can't charge
The reason I ask is because I enquired regarding a van ,the dealer is vat registered but the seller was not ,so I asked him the question why he is charging vat ,the answer was because "I am vat registered ".You will see trucks advertised from traders some state that no extra vat is to be paid.
This is where they haven't paid it so can't charge
Is this a bit of a scam ?
VAT on used vehicles is done on a margin scheme
so if a dealer buys a second hand van for £10k and sells it for £12k, then VAT is on the £2k, not the £12k, as i understand it this type of VAT does not show on the invoice and cannot be reclaimed even if it is a VAT registered business which buys it.
so if a dealer buys a second hand van for £10k and sells it for £12k, then VAT is on the £2k, not the £12k, as i understand it this type of VAT does not show on the invoice and cannot be reclaimed even if it is a VAT registered business which buys it.
SILICONEKID346HP said:
The reason I ask is because I enquired regarding a van ,the dealer is vat registered but the seller was not ,so I asked him the question why he is charging vat ,the answer was because "I am vat registered ".
Is this a bit of a scam ?
Are you VAT reg?Is this a bit of a scam ?
If not, then it's academic. You pay £x anyway. Whether that £x is what's on the screen plus 20%, or whether £x is what's on the screen, is irrelevant.
If you are, then so long as you've got a VAT invoice, it's not your problem - it's his.
And if he's charging VAT on a vehicle he doesn't need to, then he's just got to send a big chunk of money away that he doesn't need to.
Pcot said:
Upthejunction said:
Stand to be corrected, but if it's gone through private hands, it loses it's VAT status.
No it doesn't. If a VAT registered individual, or company buys a van with no VAT, and subsequently sells it again, he must charge VAT.
Someone should tell this lot then
http://www.newport-imports.com/used-vehicles/vehic...
This has recently occurred where I work
E.G
Mr Jones comes in wanting to sell his commercial vehicle, we agree on a price of say £15k
it then transpires that Mr Jones is not VAT registered & so can not give us a VAT invoice
We give Mr Jones £15k for the vehicle & he gives us a receipt for the same
Now, the way our accounts department have told me this will work will be:
We will market the vehicle for say £20k+Vat & when sold pay the %20 VAT to HMRC in the normal way
But if Mr Blogs who is not VAT registered comes along and wants to buy the vehicle we have the option of selling it to him for a total invoice price of £20k, but we will need to pay the VAT on the £5k profit made to HMRC
I'm not 100% sure if this is correct but its the way its been explained to me
E.G
Mr Jones comes in wanting to sell his commercial vehicle, we agree on a price of say £15k
it then transpires that Mr Jones is not VAT registered & so can not give us a VAT invoice
We give Mr Jones £15k for the vehicle & he gives us a receipt for the same
Now, the way our accounts department have told me this will work will be:
We will market the vehicle for say £20k+Vat & when sold pay the %20 VAT to HMRC in the normal way
But if Mr Blogs who is not VAT registered comes along and wants to buy the vehicle we have the option of selling it to him for a total invoice price of £20k, but we will need to pay the VAT on the £5k profit made to HMRC
I'm not 100% sure if this is correct but its the way its been explained to me
pja said:
Now, the way our accounts department have told me this will work will be:
Your accounts dept are wrong.Used vehicle retailing works on marginal VAT. So, if you buy a vehicle off a non-VAT reg business or an individual, you pay no VAT on it. When you sell it, you charge VAT _only_ on your margin.
So if you pay £10k, and sell for £11,200k, £200 of that is the VAT on the £1000 margin.
If you'd bought it off a VAT reg business who'd bought it from new, and reclaimed the VAT on it, then they would have to charge you VAT on your buy price - which you can then reclaim - and you then charge VAT on your full sale price. That's why some vehicles are advertised as "+vat", or described as "VAT qualifying".
As soon as somebody's not reclaimed the VAT once, then the vehicle's never going to be VAT qualifying again.
TooMany2cvs said:
Your accounts dept are wrong.
Used vehicle retailing works on marginal VAT. So, if you buy a vehicle off a non-VAT reg business or an individual, you pay no VAT on it. When you sell it, you charge VAT _only_ on your margin.
So if you pay £10k, and sell for £11,200k, £200 of that is the VAT on the £1000 margin.
If you'd bought it off a VAT reg business who'd bought it from new, and reclaimed the VAT on it, then they would have to charge you VAT on your buy price - which you can then reclaim - and you then charge VAT on your full sale price. That's why some vehicles are advertised as "+vat", or described as "VAT qualifying".
As soon as somebody's not reclaimed the VAT once, then the vehicle's never going to be VAT qualifying again.
OKUsed vehicle retailing works on marginal VAT. So, if you buy a vehicle off a non-VAT reg business or an individual, you pay no VAT on it. When you sell it, you charge VAT _only_ on your margin.
So if you pay £10k, and sell for £11,200k, £200 of that is the VAT on the £1000 margin.
If you'd bought it off a VAT reg business who'd bought it from new, and reclaimed the VAT on it, then they would have to charge you VAT on your buy price - which you can then reclaim - and you then charge VAT on your full sale price. That's why some vehicles are advertised as "+vat", or described as "VAT qualifying".
As soon as somebody's not reclaimed the VAT once, then the vehicle's never going to be VAT qualifying again.
So they are correct in what they say if we sell to a non VAT registered punter, (ie we pay VAT on the margin) but wrong about the option of adding VAT to the full amount for a VAT registered punter?
pja said:
OK
So they are correct in what they say if we sell to a non VAT registered punter, (ie we pay VAT on the margin) but wrong about the option of adding VAT to the full amount for a VAT registered punter?
Whether the buyer is VAT reg or not is the buyer's problem.So they are correct in what they say if we sell to a non VAT registered punter, (ie we pay VAT on the margin) but wrong about the option of adding VAT to the full amount for a VAT registered punter?
It's the vendor - and the entirety of the chain from original new purchase to you - that determines whether it's VAT qualifying or not. If it's ever been bought or sold by somebody not VAT-reg, then it's margin. If it's always had the VAT charged and reclaimed, then you charge full VAT.
http://www.hmrc.gov.uk/vat/sectors/motors/buying-c...
http://customs.hmrc.gov.uk/channelsPortalWebApp/ch...
pja said:
OK
So they are correct in what they say if we sell to a non VAT registered punter, (ie we pay VAT on the margin) but wrong about the option of adding VAT to the full amount for a VAT registered punter?
Who you sell to is irrelevant - you just pay the VAT on the margin calculated as 1/6 of the surplus of sale price over purchase cost.So they are correct in what they say if we sell to a non VAT registered punter, (ie we pay VAT on the margin) but wrong about the option of adding VAT to the full amount for a VAT registered punter?
So you buy for £15K (assuming vendor is not registered), sell for £21k - the VAT is £1k (ie £20% VAT on £5k profit).
David
pja said:
Now, the way our accounts department have told me this will work will be:
We will market the vehicle for say £20k+Vat & when sold pay the %20 VAT to HMRC in the normal way
But if Mr Blogs who is not VAT registered comes along and wants to buy the vehicle we have the option of selling it to him for a total invoice price of £20k, but we will need to pay the VAT on the £5k profit made to HMRC
For most other secondhand goods the principle above is correct.We will market the vehicle for say £20k+Vat & when sold pay the %20 VAT to HMRC in the normal way
But if Mr Blogs who is not VAT registered comes along and wants to buy the vehicle we have the option of selling it to him for a total invoice price of £20k, but we will need to pay the VAT on the £5k profit made to HMRC
If a VAT registered trader purchases an item without any separate reclaimable VAT shown on the purchase invoice,
he has the choice of selling either under the margin scheme or under normal VAT rules.
Maybe the rules for used commercial vehicles are different?
But a VAT registered trader in s/h goods can NOT reclaim the VAT on the purchase and then sell that item under the margin scheme.
Edited by Elderly on Tuesday 4th February 18:27
Upthejunction said:
Pcot said:
Upthejunction said:
Stand to be corrected, but if it's gone through private hands, it loses it's VAT status.
No it doesn't. If a VAT registered individual, or company buys a van with no VAT, and subsequently sells it again, he must charge VAT.
Someone should tell this lot then
http://www.newport-imports.com/used-vehicles/vehic...
Also, as imports, they may have been de-commercialised!
This whole thread has been taken off topic...the OP related to vans, not cars. The VAT element is completely different between commercial vehicles, and cars.
Pcot said:
No it doesn't.
If a VAT registered individual, or company buys a van with no VAT, and subsequently sells it again, he must charge VAT.
That means the tax man as gained ,seems unfair I can not claim the vat back I have paid , then they I sell it to a vat registered company then they sell it with vat !If a VAT registered individual, or company buys a van with no VAT, and subsequently sells it again, he must charge VAT.
Bloody hell that's greedy .
Pcot said:
No it doesn't.
If a VAT registered individual, or company buys a van with no VAT, and subsequently sells it again, he must charge VAT.
That means the tax man as gained ,seems unfair I can not claim the vat back I have paid , then they I sell it to a vat registered company then they sell it with vat !If a VAT registered individual, or company buys a van with no VAT, and subsequently sells it again, he must charge VAT.
Bloody hell that's greedy .
I would like to buy ether a new one or a couple of years old but I can not claim the vat back .
Even if I did earn enough to be vat registered my accountant bill would go up and I would be less competitive .
VAT is essentially a "chain" with each VAT registered seller adding VAT when they sell a good or service - and each VAT registered buyer reclaiming that VAT when they BUY that good or service from the VAT registered seller.
If the chain is broken by one of the buyers NOT being VAT registered, then the VAT man gets to keep the VAT that was charged by the VAT registered seller. Usually, the non-registered "buyer" is Joe Public and is the end of the chain at which point the Exchequer finally gets to keep the tax levied along the "VAT Chain".
Occasionally, the "VAT Chain" is broken when one of the TRADERS involved in the chain is not VAT registered. At that point, HMRC gets to keep the VAT levied on the sale to the non-registered trader. If the item is subsequently sold on to a registered trader then, if and when HE eventually sells the item, he will need to charge VAT when he sells it. The VAT chain recommences.
Of course, the Exchequer getting to keep tax revenue is the whole purpose of a tax. There is no point in levying a tax if the Government doesn't get its hands on it eventually.
I would hazard a guess that, because of the UK's very high VAT Turnover threshold, there is a much higher proportion of non-VAT Registered traders in the UK than in most other EU countries, so we get more examples of VAT Chain breaks than say, France or Germany.
If the chain is broken by one of the buyers NOT being VAT registered, then the VAT man gets to keep the VAT that was charged by the VAT registered seller. Usually, the non-registered "buyer" is Joe Public and is the end of the chain at which point the Exchequer finally gets to keep the tax levied along the "VAT Chain".
Occasionally, the "VAT Chain" is broken when one of the TRADERS involved in the chain is not VAT registered. At that point, HMRC gets to keep the VAT levied on the sale to the non-registered trader. If the item is subsequently sold on to a registered trader then, if and when HE eventually sells the item, he will need to charge VAT when he sells it. The VAT chain recommences.
Of course, the Exchequer getting to keep tax revenue is the whole purpose of a tax. There is no point in levying a tax if the Government doesn't get its hands on it eventually.
I would hazard a guess that, because of the UK's very high VAT Turnover threshold, there is a much higher proportion of non-VAT Registered traders in the UK than in most other EU countries, so we get more examples of VAT Chain breaks than say, France or Germany.
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