Vat question

[petery27]

I run a race team and have been asked to build a race car for a customer for next season, this will include sourcing a car for them.
When charging them for the car on the invoice should I be charging them VAT on the full value even though I will be unable to claim any vat on the purchase? I wouldn’t be charging anymore for the base car than I paid but believe I would have to charge vat as a selling a piece of machinery. They are questioning this and insist I shouldn’t be charging vat on the car.
Thanks

[tight fart]

A car dealer would pay the vat on the profit only, if worried and not making any money on the car ask them to pay direct.

[craigjm]

Are you VAT registered?

[petery27]

I’m vat registered, not worried about it but as it’s a piece of equipment essentially that is then sold as race car not a road car I assumed it would be vat able, happy to be told otherwise

[CaptainSlow]

What is the history of the car? When was it purchased new and by whom?

[petery27]

2nd hand car purchased by me/company recently

[Eric Mc]

Is it a road legal car at the moment?

Will it be road legal at the time you sell it?

Why did you buy the car originally?

[petery27]

Yes is road legal when buying it and when selling bought to turn in to a race car for customers

[Eric Mc]

So, you are not selling a road going car?

[petery27]

It’s still a road going car and has an mot etc. But that is no longer it’s main use, I was just looking for a simple answer really.
If buying an item with no vat when then reselling it should be invoiced with vat on the full value?

[drmcw]

If it's any help when I flew on business which at the time attracted no VAT I would bill the client for that amount plus the VAT as advised by the VAT man as it was part of a service that attracted VAT. He said my client was VAT registered so wouldn't care anyway. Is your customer VAT registered or heaven forefend a charity?

This was some years ago though.

Mike

[Eric Mc]

petery27 said:

It’s still a road going car and has an mot etc. But that is no longer it’s main use, I was just looking for a simple answer really.
If buying an item with no vat when then reselling it should be invoiced with vat on the full value?

VAT isn't simple - so the answers can't always be as simple as you would like.

The VAT second hand margin scheme is specifically aimed at auto traders who buy second hand cars and sell tem to the general public for normal use.

If you are modifying and developing cars for competition use that would normally not allow you to make use of the VAT Margin scheme, in other words, you would need to charge full VAT on the selling price of the revised and developed vehicle.

There is a good chance that the customer for such a vehicle might be a VAT registered business in its own right, such as a racing team or a racing car dealer - so even if you had to charge them full VAT on the sale price of the converted vehicle, they could reclaim that VAT in the normal way.