VAT on used cars
Discussion
Ok here is a question for you traders & others.
If you buy a second hand car - my understanding is that you have 2 options with regard to VAT (assuming your VAT registered) 1st you can charge full VAT on the whole value of the sale price OR 2nd you can charge Full VAT on the margin you have made on the car.
It seems that all car supermarkets do charge you full VAT.
What about dealers with 2nd hand cars?
If you buy a second hand car - my understanding is that you have 2 options with regard to VAT (assuming your VAT registered) 1st you can charge full VAT on the whole value of the sale price OR 2nd you can charge Full VAT on the margin you have made on the car.
It seems that all car supermarkets do charge you full VAT.
What about dealers with 2nd hand cars?
If you are a car dealer, new cars sold will contain 17.5% VAT included in the sale price.
Depending on the particular circumtances of the customer, the customer MIGHT be in a position to reclaim that VAT. However, in most cases, they won't.
If the car being sold is "second hand", in normal circumastances the dealer must add VAT onto the "PROFIT MARGIN" element of the sale price of the car. The customer CANNOT in any circumstances reclaim any of this "Profit Margin" VAT.
If the dealer bought the second hand car from a VAT registered business, and THAT business had reclaimed the VAT on the car when it was bought new, that business MUST charge VAT on the full sale value of that car when it sells the car to the dealer.
The car dealer can then exercise one of two options -
i) he can forego reclaiming the VAT on the purchase price of the car - following which he will only charge VAT on the margin when he eventually sells it on. The customer buying this car will not be able to reclaim this VAT (sas mentioned above).
ii) he can reclaim the VAT at the point of purchase but he will be obliged to charge VAT on the full sale price when he sells it on. The new customer may or may not be able to reclaimm this VAT depending on the circumstances in which the car is going to be used in the customer's business.
Depending on the particular circumtances of the customer, the customer MIGHT be in a position to reclaim that VAT. However, in most cases, they won't.
If the car being sold is "second hand", in normal circumastances the dealer must add VAT onto the "PROFIT MARGIN" element of the sale price of the car. The customer CANNOT in any circumstances reclaim any of this "Profit Margin" VAT.
If the dealer bought the second hand car from a VAT registered business, and THAT business had reclaimed the VAT on the car when it was bought new, that business MUST charge VAT on the full sale value of that car when it sells the car to the dealer.
The car dealer can then exercise one of two options -
i) he can forego reclaiming the VAT on the purchase price of the car - following which he will only charge VAT on the margin when he eventually sells it on. The customer buying this car will not be able to reclaim this VAT (sas mentioned above).
ii) he can reclaim the VAT at the point of purchase but he will be obliged to charge VAT on the full sale price when he sells it on. The new customer may or may not be able to reclaimm this VAT depending on the circumstances in which the car is going to be used in the customer's business.
The VAT element is determined ny the VAT status of the car.
If it's had the VAT reclaimed on the purchase because it's either been run by a VAT qualifying company then VAT is charged on the whole value but must be included in the sale price.
If the vehicle isn't VAT qualifying because its come from a private individual then VAT is charged on the margin and doesn't show on the invoice.
If it's had the VAT reclaimed on the purchase because it's either been run by a VAT qualifying company then VAT is charged on the whole value but must be included in the sale price.
If the vehicle isn't VAT qualifying because its come from a private individual then VAT is charged on the margin and doesn't show on the invoice.
But this is where it gets odd for me - if the dealer had bought from another Business and they had reclaimed the tax why would any dealer not charge the full VAT? They are taking a loss on the VAT aspect of the car & unless its a very very profitable sale (impossible I would imagine) then they are out of pocket by a fair margin.
Is it generally that any B2B sales will be full vat or is it quite different?
Is it generally that any B2B sales will be full vat or is it quite different?
So could one assume that all lease cars will be sold with full VAT rate on them?
Also with PCP's as the car is the finance companies car (so vat registered business) wouldnt all PCP's be fully VAT chargeable to the next buyer - if we assume they hand the car back at the end of the term.
Also with PCP's as the car is the finance companies car (so vat registered business) wouldnt all PCP's be fully VAT chargeable to the next buyer - if we assume they hand the car back at the end of the term.
Welshbeef said:
But this is where it gets odd for me - if the dealer had bought from another Business and they had reclaimed the tax why would any dealer not charge the full VAT? They are taking a loss on the VAT aspect of the car & unless its a very very profitable sale (impossible I would imagine) then they are out of pocket by a fair margin.
Is it generally that any B2B sales will be full vat or is it quite different?
Many people get their knickers in a twist about VAT on cars, and seem to somehow think that the "VAT aspect" can be lost somewhere. It can't - it either has to be paid separately all along the line, or it becomes built into the price when the car is first registered. Some people think nearly new cars are very profitable for dealers as dealers get the VAT element back, but they don't.Is it generally that any B2B sales will be full vat or is it quite different?
Cars have a market price which is exactly the same whether VAT can be separated out or not. So if a business sells a VAT qualifiying car worth £11750, then car will be invoiced at £10K + VAT.
Welshbeef said:
jamoor said:
Welshbeef said:
Am I correct about the leased & PCP cars all being VAT qualifying?
Well they will have VAT paid on each repayment.What exactly are you trying to achieve here?
Eric Mc said:
Are you a car dealer?
Are you a VAT registered business?
Are you intending to reclaim the Input VAT on the purchase of a motor car?
Not a car dealer, but VAT registered Business. Are you a VAT registered business?
Are you intending to reclaim the Input VAT on the purchase of a motor car?
Not planning on buying a car and reclaiming the tax - purely interested in increasing my knowledge on this area.
Welshbeef said:
Eric Mc said:
Are you a car dealer?
Are you a VAT registered business?
Are you intending to reclaim the Input VAT on the purchase of a motor car?
Not a car dealer, but VAT registered Business. Are you a VAT registered business?
Are you intending to reclaim the Input VAT on the purchase of a motor car?
Not planning on buying a car and reclaiming the tax - purely interested in increasing my knowledge on this area.
If you ARE ever tempted to reclaim Input VAT on the purchase of a motor car, just remember that it is VERY difficult for ordinary traders to justify the VAT reclaim on a car. And, as I mentioned above, if the car is being purchased from a dealer who is applying the VAT 2nd Hand Car Margin Scheme, the Input VAT cannot be reclaimed in any circumstances.
Welshbeef said:
Eric Mc said:
Are you a car dealer?
Are you a VAT registered business?
Are you intending to reclaim the Input VAT on the purchase of a motor car?
Not a car dealer, but VAT registered Business. Are you a VAT registered business?
Are you intending to reclaim the Input VAT on the purchase of a motor car?
Not planning on buying a car and reclaiming the tax - purely interested in increasing my knowledge on this area.
Same applies to used cars as long as they are "VAT qualifying" - a few dealers highlight this on used stock, otherwise you'd have to ask.
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