VAT on Commercial Vehicles
Discussion
Eric Mc said:
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.
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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.
Slightly OT but .........
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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 was a VAT registered photographer and was commissioned by book publishers.
NikCanMinPent UK would import a camera from Japan (no VAT I assume).
A camera shop would buy a NikCanMinPent from the importers and would be charged VAT
which they would then reclaim.
I would buy a NikCanMinPent and be charged VAT by the shop which I would then reclaim.
Same with the film:
Importers purchased film from Japan, sold it to shops, who sold it to me and all of us
reclaimed the VAT charged.
Same with the processing:
I sent it to the lab by courier, the lab processed it etc. etc.
Finally I would supply say 200 black and white prints and 100 colour transparencies
to a publishing house to use in their latest book.
I would charge them VAT for my services and they would reclaim it.
As printed books are zero rated for VAT purposes, no VAT is charged to Joe Public at the point of sale.
A long chain of VAT being charged and reclaimed with no gain to the exchequer
There are anomalies. But on the whole, VAT is one of the biggest suppliers of dosh to the Exchequer so they put up with these quirks. The bulk of the burden of administration and collection of the tax falls on the traders, so it is a relatively cheap tax for the government to collect.
Don't forget that even though books are Zero Rated, a lot of other printed matter is Standard Rated.
Don't forget that even though books are Zero Rated, a lot of other printed matter is Standard Rated.
To return to the OPs question - this applies only to commercial vehicles (other replies may be correct for non-commercials):
Where a VAT registered entity purchases a commercial vehicle (including double cabs, etc.) from a Non-VAT registered entity, they may resell the vehicle without charging VAT UNLESS they have used it in their VAT registered business. Where they do use it in their business, VAT must be charged on the sale.
Eg1 Franks Motors Ltd (VAT Registered) buys a Toyota Hilux from Mike (a member of Joe Public) and pay no VAT. It sits in their forecourt for 3 months and then they sell it on to Georgie Porgie Construction (VAT Registered). Here there would be no VAT charged on the sale.
Eg2 Franks Motors Ltd (VAT Registered) bought another Toyota Hilux from Mike (a member of Joe Public) and pay no VAT. It sits in their forecourt for a month but, this time their parts collection truck packs in and they use it for two months as their collections van (until their new one arrives). Again they sell it on to Georgie Porgie Construction (VAT Registered). Here there would be VAT charged on the sale as they have used it in their VAT registered business.
In either example, Mike would have paid VAT on his purchase if the vehicle was brand new. So HMRC get that from the first seller. Since Georgie Porgie is a VAT registered business and the vehicles have been used in his business, they will add VAT to their invoices when they come to sell them.
Hope this has made things a bit clearer.
Where a VAT registered entity purchases a commercial vehicle (including double cabs, etc.) from a Non-VAT registered entity, they may resell the vehicle without charging VAT UNLESS they have used it in their VAT registered business. Where they do use it in their business, VAT must be charged on the sale.
Eg1 Franks Motors Ltd (VAT Registered) buys a Toyota Hilux from Mike (a member of Joe Public) and pay no VAT. It sits in their forecourt for 3 months and then they sell it on to Georgie Porgie Construction (VAT Registered). Here there would be no VAT charged on the sale.
Eg2 Franks Motors Ltd (VAT Registered) bought another Toyota Hilux from Mike (a member of Joe Public) and pay no VAT. It sits in their forecourt for a month but, this time their parts collection truck packs in and they use it for two months as their collections van (until their new one arrives). Again they sell it on to Georgie Porgie Construction (VAT Registered). Here there would be VAT charged on the sale as they have used it in their VAT registered business.
In either example, Mike would have paid VAT on his purchase if the vehicle was brand new. So HMRC get that from the first seller. Since Georgie Porgie is a VAT registered business and the vehicles have been used in his business, they will add VAT to their invoices when they come to sell them.
Hope this has made things a bit clearer.
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