Vat on used car prices.

[Bund]

I keep seeing adverts(mainly Range Rover) with what seems a good value price to then read at the bottom plus vat.

As I understand it from a brief Internet search you only need to pay the 20% vat on the sale price if the Dealer has an invoice showing them paying a price plus vat? If they do not have an invoice showing they paid vat then they only pay vat on the profit from purchasing price to selling price less costs incurred I guess? So I should only be paying the same?

So I think I'm in my right to ask them to show me the buying invoice if they advertise a car price plus vat?

I can't see them being happy about showing you how much they paid but surely they would have to?

Anyone clarify?

Edited by Bund on Sunday 23 December 08:50

[anonymous-user]

Dealer has no such obligation.

As long as the invoice for your purchase shows the vat paid as a separate element, all is well.

It is a bit off to advertise vehicles to consumers in this way, the advertised price ought to be the full price and be marked vat qualifying imo

[Bund]

JPJPJP said:

Dealer has no such obligation.

As long as the invoice for your purchase shows the vat paid as a separate element, all is well.

It is a bit off to advertise vehicles to consumers in this way, the advertised price ought to be the full price and be marked vat qualifying imo

Ok I understand.

I just looked at my last used car invoice and there is no vat on the sale price just the warranty which ties up with my "they pay vat on the difference between purchase price and sale price" line.


I agree, they should just offer them the way you say.

[ILoveMondeo]

Am I being cynical or are cars advertised this way a veiled way of saying "no vat if you pay cash" ?

[Steamer]

I must have totally the wrong end of the stick re. VAT rules, but I always thought to make a Range Rover 'Vat applicable' it would have to have the back side-windows covered and remove the back seats (van / pickup style) and sold as a commercial vehicle.

[anonymous-user]

ILoveMondeo said:

Am I being cynical or are cars advertised this way a veiled way of saying "no vat if you pay cash" ?

Possibly, though it's more likely just a trick to get your attention with a cheap price.

[HootersGsy]

I thought for secondhand car dealers they only pay VAT on the margin, I.e. buy a car for £1,000, sell it for £1,200 you only have to take VAT out of the £200 margin? No need for VAT to have been paid on the purchased vehicle.

Edited by HootersGsy on Sunday 23 December 09:29

[Wheelrepairit]

Some dealer demos are also vat chargeable .

[matc]

All dealer demos are VAT applicable, as are most cars we buy direct from the manufacturer. It shouldn't make any difference to the average buyer; but it does mean they're slightly more attractive to the export market - which is who the range rover advertisers are trying to appeal to.

[markmullen]

They are unlikely to be sold plus Vat but may be advertised as VAT Qualifying which simply means the price incorporates a reclaimable VAT element.

This is useful mainly for export customers who can buy it VAT free, or for companies such as lease or hire companies.

It would be very unusual to advertise a car (rather than a commercial) priced as being £x plus VAT.

[Jagmanv12]

Bund said:

I keep seeing adverts(mainly Range Rover) with what seems a good value price to then read at the bottom plus vat.

As I understand it from a brief Internet search you only need to pay the 20% vat on the sale price if the Dealer has an invoice showing them paying a price plus vat? If they do not have an invoice showing they paid vat then they only pay vat on the profit from purchasing price to selling price less costs incurred I guess? So I should only be paying the same?

So I think I'm in my right to ask them to show me the buying invoice if they advertise a car price plus vat?

I can't see them being happy about showing you how much they paid but surely they would have to?

Anyone clarify?

Edited by Bund on Sunday 23 December 08:50

There's no allowance for any costs incurred. Dealer buys for £1000, spends £500 on it, sells for £2000. Dealer pays vat on £1000 gross margin.

[wmo418]

Quoting 'plus VAT' does not necessarily mean that VAT will be applied at 20% of the advertised price. As a previous poster said it signals the net price to an overseas buyer or business able to reclaim the VAT.
Under HMRC rules all invoices for cars sold under the margin scheme should be clearly marked as such with words to the effect 'This invoice is for a second-hand margin scheme supply.'

[2 sMoKiN bArReLs]

Steamer said:

I must have totally the wrong end of the stick re. VAT rules, but I always thought to make a Range Rover 'Vat applicable' it would have to have the back side-windows covered and remove the back seats (van / pickup style) and sold as a commercial vehicle.

That's only relevant if you are VAT registered as a buyer & want to reclaim the vat. (You can reclaim VAT on commercials, but generally not on cars)

Edited by 2 sMoKiN bArReLs on Sunday 23 December 13:32

[Bund]

I'm sure we all look at used cars a lot on here and everywhere else. I read about the second hand margin scheme and that's why I asked the initial question. Has anyone seen an advert mentioning this? All iv seen is plus vat, vat qualifying.

Here is one of the cars and description

http://classifieds.pistonheads.com/classifieds/use...

[Super Slo Mo]

Jagmanv12 said:

There's no allowance for any costs incurred. Dealer buys for £1000, spends £500 on it, sells for £2000. Dealer pays vat on £1000 gross margin.

presumably you can reclaim vat on any parts and labour you buy that has vat applied?

[wmo418]

Correct.

Super Slo Mo said:

Jagmanv12 said:

There's no allowance for any costs incurred. Dealer buys for £1000, spends £500 on it, sells for £2000. Dealer pays vat on £1000 gross margin.

presumably you can reclaim vat on any parts and labour you buy that has vat applied?

[Super Slo Mo]

wmo418 said:

Super Slo Mo said:

Jagmanv12 said:

There's no allowance for any costs incurred. Dealer buys for £1000, spends £500 on it, sells for £2000. Dealer pays vat on £1000 gross margin.

presumably you can reclaim vat on any parts and labour you buy that has vat applied?

Correct.

That's what I thought.

I'm sure we had this conversation on here not too long ago and, despite protestations to the contrary, the margin scheme is essentially the same as the normal VAT system that applies to any other business.

[wmo418]

No it isn't.
If I buy some wood for £1000 and turn it into a table that I sell for £1500 then I have to add 20% VAT and the customer pays £1800, with the added £300 going as output tax to HMRC.
If I am an antique dealer and buy a secondhand table for £1000 and sell it on for £1800 then my margin is £800 and that margin is liable for VAT. It is calculated as if the £800 includes VAT, so divide by 12 and multiply by 10 and the net of VAT price is £1666.67 and the output tax VAT is £133.33.

In both cases I am able to reclaim VAT as input tax on anything I purchase and use in the process of 'adding value' - eg nails, glue and polish (including the original wood in the first instance).

The difference between the two schemes is hopefully obvious. The consumer pays £1800 for his table whether it is new or antique but the amounts taken by the supplier and HMRC are quite different.
Whether it is morally justifiable for the government to cream off yet more VAT on an item that was already fully taxed the first time it was sold is an entirely different question...

[Super Slo Mo]

wmo418 said:

No it isn't.
If I buy some wood for £1000 and turn it into a table that I sell for £1500 then I have to add 20% VAT and the customer pays £1800, with the added £300 going as output tax to HMRC.
If I am an antique dealer and buy a secondhand table for £1000 and sell it on for £1800 then my margin is £800 and that margin is liable for VAT. It is calculated as if the £800 includes VAT, so divide by 12 and multiply by 10 and the net of VAT price is £1666.67 and the output tax VAT is £133.33.

In both cases I am able to reclaim VAT as input tax on anything I purchase and use in the process of 'adding value' - eg nails, glue and polish (including the original wood in the first instance).

The difference between the two schemes is hopefully obvious. The consumer pays £1800 for his table whether it is new or antique but the amounts taken by the supplier and HMRC are quite different.
Whether it is morally justifiable for the government to cream off yet more VAT on an item that was already fully taxed the first time it was sold is an entirely different question...

It strikes me that there's more money in it for the supplier in your second example, and less for the Revenue, assuming the £1000 for wood in the first example had no VAT element for some reason (£500 profit, plus £300 Tax).

In fact, if you assume your £1000 for wood was inclusive of VAT, and you can thus recover the VAT from it, your profit for both examples is identical at £666.66, and the Revenue's share is £133.33. In this case, I see no difference between the schemes.

Of course, if the wood in example 1 was £1,000 plus VAT, then your profit is back to the £500, with an additional £300 going to the tax man (Your £500 consists of £300 margin plus £200 in recovered VAT).

And on the moral question, why is it unfair to be subjected to tax on a profit? The fact the table was fully taxed first time around doesn't matter, you're adding a profit to it, which is, and should be, subject to tax.

[GreigM]

JPJPJP said:

It is a bit off to advertise vehicles to consumers in this way, the advertised price ought to be the full price and be marked vat qualifying imo

Not only a bit off, but entirely illegal as well. All prices advertised towards consumers must include all taxes (if applicable)....and I suspect even "VAT Qualifying" vehicles should still be advertised with a VAT inclusive price and a notification that it is VAT qualifying.