Car Trading...Again
Discussion
Hi all,
I've read numerous threads about this from years past but I wanted to ask a few questions of my own, as in 2015 things may be different; I come to you looking for advice.
Hopefully this thread will be short and sweet, open and shut but I expect (due to the nature of PH Gassing), that I'll be called a tool amongst other things, before you all turn on each other and burn this to the ground in via some sort of verbal bloodbath.
Anyway, myself and my Dad are very seriously wishing to start up a car trading business. This will be part-time to begin with but, as he nears retirement in a few short years it would be great to have something full-time set up to make it an enjoyable one for him while still doing something involving his passion (cars), as well as (hopefully) a lucrative full time job for me some day; in the meantime I will continue my employment.
As with most new ventures, it will be taken with baby-steps first and we aim to test the water with small outlays combining a fairly healthy joint pool of disposable cash i.e. small and cheap cars however, our niche will be in acquiring used cars that "need work" which we will correct ourselves. The reason for this is that my Dad is a skilled mechanic and has been so since the 60’s. He’s worked on pretty much everything and I have faith in his abilities more-so than any other mechanic I’ve met so, the new buyer can rest assured that the car should remain mechanically sound. I on the other hand, although handy with a spanner, know my way best around detailing equipment but, also the business/finance management side of things is fairly well indented into my brain.
We have easy access to MOT facilities, a bodyshop and storage so I think we stand a pretty good chance at this.
Anyway, I want to start this all above board. As tempting as it is to buy a couple of cars and use them briefly before selling I’d rather like to just start this as it is intended to end up so, please could I ask you help with my questions?
- I believe that circa 6 cars can change from your personal ownership within 12mths before you are considered a trader. Is this true? If possible we would like to start as traders straight away, with correct insurance, trade plates etc.
- With the new road tax rules, how does a trader obtain new tax for the vehicle before sale?
- I understand that the threshold for declaring yourself as a VAT registered business is circa £70k. Is this still true and, is there an opportunity/need to register before this point?
- What is HMRC’s interest in your sales/what must be paid and when and, is this regardless of VAT registration? We will keep invoices and paperwork filed and organised from the first sale.
- How best are the DVLA & HMRC informed that you are a trader? Is this at the completion of the first V5 as a trader and/or application for trade plates (VTL301)?
I think that’s it for now but feel free to chip in as you feel helpful.
I've read numerous threads about this from years past but I wanted to ask a few questions of my own, as in 2015 things may be different; I come to you looking for advice.
Hopefully this thread will be short and sweet, open and shut but I expect (due to the nature of PH Gassing), that I'll be called a tool amongst other things, before you all turn on each other and burn this to the ground in via some sort of verbal bloodbath.
Anyway, myself and my Dad are very seriously wishing to start up a car trading business. This will be part-time to begin with but, as he nears retirement in a few short years it would be great to have something full-time set up to make it an enjoyable one for him while still doing something involving his passion (cars), as well as (hopefully) a lucrative full time job for me some day; in the meantime I will continue my employment.
As with most new ventures, it will be taken with baby-steps first and we aim to test the water with small outlays combining a fairly healthy joint pool of disposable cash i.e. small and cheap cars however, our niche will be in acquiring used cars that "need work" which we will correct ourselves. The reason for this is that my Dad is a skilled mechanic and has been so since the 60’s. He’s worked on pretty much everything and I have faith in his abilities more-so than any other mechanic I’ve met so, the new buyer can rest assured that the car should remain mechanically sound. I on the other hand, although handy with a spanner, know my way best around detailing equipment but, also the business/finance management side of things is fairly well indented into my brain.
We have easy access to MOT facilities, a bodyshop and storage so I think we stand a pretty good chance at this.
Anyway, I want to start this all above board. As tempting as it is to buy a couple of cars and use them briefly before selling I’d rather like to just start this as it is intended to end up so, please could I ask you help with my questions?
- I believe that circa 6 cars can change from your personal ownership within 12mths before you are considered a trader. Is this true? If possible we would like to start as traders straight away, with correct insurance, trade plates etc.
- With the new road tax rules, how does a trader obtain new tax for the vehicle before sale?
- I understand that the threshold for declaring yourself as a VAT registered business is circa £70k. Is this still true and, is there an opportunity/need to register before this point?
- What is HMRC’s interest in your sales/what must be paid and when and, is this regardless of VAT registration? We will keep invoices and paperwork filed and organised from the first sale.
- How best are the DVLA & HMRC informed that you are a trader? Is this at the completion of the first V5 as a trader and/or application for trade plates (VTL301)?
I think that’s it for now but feel free to chip in as you feel helpful.
There is no "6 car" thing. This is made up. If you are running it as a business you are trading whether you do 2 or 2000.
On a practical basis, you can only really tax a car if you register it in your name now. Whilst you can obtain tax easily enough, if you do not get a new V5 it can cause issues for the new owner taxing it.
VAT registration is about £80k and you can voluntarily register. Note you should register when you think you're going to meet the limit - not when you actually do.
You pay tax on your profits just like any other income/business. Tax paid makes no difference with VAT although, obviously, your VAT liability doesn't go on your profit. You need to keep accurate accounts just like any other business.
You can inform HMRC about starting a business online.
On a practical basis, you can only really tax a car if you register it in your name now. Whilst you can obtain tax easily enough, if you do not get a new V5 it can cause issues for the new owner taxing it.
VAT registration is about £80k and you can voluntarily register. Note you should register when you think you're going to meet the limit - not when you actually do.
You pay tax on your profits just like any other income/business. Tax paid makes no difference with VAT although, obviously, your VAT liability doesn't go on your profit. You need to keep accurate accounts just like any other business.
You can inform HMRC about starting a business online.
Just to add my two pence worth into this..
The first step would be to decide if you are going to start a Ltd Company or work as a sole trader. There are benefits to both. I would then arrange Motor Traders Insurance through a reputable firm.. There are plenty of non reputable ones! Next is to apply for trade plates with DVLA (this will allow you to drive untaxed cars for Business purposes only. This does not include driving to and from work.. (this rule is flaunted my many). If you want to do things properly and register for VAT then fire away and do that.. Turnover in the motor trade is generally high so selling £2000 cars you reach £70k quickly. You also need to register with HPI for a trade account to allow you to check vehicle you are purchasing.. The main valuation companies such as CAP and Glass' guide are available through HPI.
Next step is buying some cars.. Best place is to buy part exchanges from main dealers but a lot of them are auction only now and if not then there is generally already someone there doing it. So go to the auction as a start and find something there..
Ok, you have found some stock, tarted them up and advertised them.. You sell your first car for a £500 profit.. The £500 is the difference between what you paid for the car and what you sold it for. Mr Vat man wants his share of the £500 as we pay VAT on our profit in the motor trade. £83.33 needs to be set aside for VAT. Your gross profit on that car is now £416.67. From that figure you can deduct your expenses associated with that vehicle to obtain an actual net profit for that vehicle however for the purposes of VAT we pay between purchase and sale price.
There are always threads on PH about our obligations as traders to supply warranties etc etc.. The only thing to remember is the sales of goods act.. The vehicle must be fit for purpose. This however is dependant on lots of factors such as vehicle price and mileage etc etc.. learn the SOGA as you WILL at some point in your motor trade career regardless of how honest and stand up you are have unhappy customers and they will attempt to quote it to you. It is part of the industry. There will be cars that don't make a profit, there will be cars that break down the day after a customer collects it, there will be unhappy customers, there will also be plenty of happy customers if you do the job right.
There is money to be made buying and selling cars. It is by no means easy to do it well. I would advise anyone who doesn't have lots of money they can afford to lose get some experience in the industry first. However, I am sure with enough determination it might work for you otherwise. Good luck
The first step would be to decide if you are going to start a Ltd Company or work as a sole trader. There are benefits to both. I would then arrange Motor Traders Insurance through a reputable firm.. There are plenty of non reputable ones! Next is to apply for trade plates with DVLA (this will allow you to drive untaxed cars for Business purposes only. This does not include driving to and from work.. (this rule is flaunted my many). If you want to do things properly and register for VAT then fire away and do that.. Turnover in the motor trade is generally high so selling £2000 cars you reach £70k quickly. You also need to register with HPI for a trade account to allow you to check vehicle you are purchasing.. The main valuation companies such as CAP and Glass' guide are available through HPI.
Next step is buying some cars.. Best place is to buy part exchanges from main dealers but a lot of them are auction only now and if not then there is generally already someone there doing it. So go to the auction as a start and find something there..
Ok, you have found some stock, tarted them up and advertised them.. You sell your first car for a £500 profit.. The £500 is the difference between what you paid for the car and what you sold it for. Mr Vat man wants his share of the £500 as we pay VAT on our profit in the motor trade. £83.33 needs to be set aside for VAT. Your gross profit on that car is now £416.67. From that figure you can deduct your expenses associated with that vehicle to obtain an actual net profit for that vehicle however for the purposes of VAT we pay between purchase and sale price.
There are always threads on PH about our obligations as traders to supply warranties etc etc.. The only thing to remember is the sales of goods act.. The vehicle must be fit for purpose. This however is dependant on lots of factors such as vehicle price and mileage etc etc.. learn the SOGA as you WILL at some point in your motor trade career regardless of how honest and stand up you are have unhappy customers and they will attempt to quote it to you. It is part of the industry. There will be cars that don't make a profit, there will be cars that break down the day after a customer collects it, there will be unhappy customers, there will also be plenty of happy customers if you do the job right.
There is money to be made buying and selling cars. It is by no means easy to do it well. I would advise anyone who doesn't have lots of money they can afford to lose get some experience in the industry first. However, I am sure with enough determination it might work for you otherwise. Good luck
With regard to DVLA knowing you are a trader then your application for a trade license should cover that.
As for HMRC.. As mentioned above you will pay VAT on your profit but for your personal tax purposes then if you are a sole trader you will pay tax on your net profit or if you are a limited company you can pay yourself a salary plus the company will need to pay corporation tax.
As for HMRC.. As mentioned above you will pay VAT on your profit but for your personal tax purposes then if you are a sole trader you will pay tax on your net profit or if you are a limited company you can pay yourself a salary plus the company will need to pay corporation tax.
P4T put it all very well. Joe Public has the misguided idea that you pay £2000 for a car, sell it for £3000 and stick the £1000 in your pocket. That ain't how it works, (unless you're dishonest like, sadly, a lot of "motor traders" are out there).
One thing above all else. You MUST enjoy what you do. The genuine, friendly, fun customers out there far outweigh the tossers. Reputation takes time, and reputation is what you're trying to achieve. This will take around 2 - 5 years. If your motive is to make lots of money, it is unlikely you will, but stick at it nevertheless.
One thing above all else. You MUST enjoy what you do. The genuine, friendly, fun customers out there far outweigh the tossers. Reputation takes time, and reputation is what you're trying to achieve. This will take around 2 - 5 years. If your motive is to make lots of money, it is unlikely you will, but stick at it nevertheless.
1Addicted said:
As with most new ventures, it will be taken with baby-steps first.
Rule 1: Most of your profit will come from buying cheap, not selling high.At this point I suggest you consider looking to buy and sell, one at a time, half a dozen private cars for your own use and see how you get on. It will soon become clear,
- Whether you are able to sell for more than you have paid,
- How many times a week you need to do that in order to run your household, and
- How many more times a week you need to do that in order to pay significant business overheads as well.
Good luck!
confused_buyer said:
There is no "6 car" thing. This is made up.
The local authority planning department may disagree, if this kind of business is being run from home and the neighbours have complained to them about it (even if it is just a case of swapping cars regularly and as such quite innocent, which the LA will need to disprove) 
.Some planning depts may have a limit of "12 cars sold p.a. from home", others may quote 6... There is no hard or fast figure. But if the neighbours complain and planning become interested...
Motor Trading is seen (rightly or wrongly) as antisocial by local authorities, and if trading from home (rather than just swapping cars on a regular basis) it is essential to keep the neighbours on side (service their cars with materials at trade rates, for example, and do noisy work when they are making noise themselves such as mowing the lawn)
.All other comments such as "if you're trading, you're trading" and so on stand
- this post is something else to consider as well if working from home; if the OP's plan is to work from a dedicated business unit, please disregard it 
.Thanks again.
I'm under no illusions that we'll be millionaires but, one day it would be nice to have my full time job as my passion also so, although it might be not much better than a good London salary, the lifestyle change could be for the better.
We'll be trading from a small building to begin with. It's not much, a barn if you will but it's water/wind tight and secure and has scope for a little office space. Its on the same site as our lifts and tools so really we should be totally self sufficient at the site, aside from dropping a car around the corner for body repairs if need be.
I'm under no illusions that we'll be millionaires but, one day it would be nice to have my full time job as my passion also so, although it might be not much better than a good London salary, the lifestyle change could be for the better.
We'll be trading from a small building to begin with. It's not much, a barn if you will but it's water/wind tight and secure and has scope for a little office space. Its on the same site as our lifts and tools so really we should be totally self sufficient at the site, aside from dropping a car around the corner for body repairs if need be.
confused_buyer said:
You actually need special planning permission for motor trade use - normal "business" or "industrial" planning permission does not technically cover it.
I forget the category but it is a special one - like fast food outlets etc.
Will certainly query this but, the site is already equipped with a garage, where my Dad presently works so hopefully that extends to the out-building belong to the owner also.I forget the category but it is a special one - like fast food outlets etc.
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