Commentary

V3.534 Margin scheme—used motor cars

Part V3 Supplies, acquisitions and imports

V3.534 Margin scheme—used motor cars

V3.534 Margin scheme—used motor cars

An order1 made under VATA 1994 s 50A provides that a taxable person may opt to account for VAT on the profit margin on a supply of a used motor car rather than by reference to its value2 in the circumstances described below.

Meaning of used motor car

A motor car is a vehicle within the description set out in V1.293.

A motor car is not “used” merely because it has been registered or has been purchased from another dealer and has incurred some road mileage en route. A used car is one which falls into one or other of the following categories3

  1.  

    (1)     cars which have been driven on the road by (or at the direction of) the persons who purchased them under a retail sale;

  2.  

    (2)     cars which have been appropriated and used by a dealer for his business before becoming the subject of a retail sale4.

The sale of parts from a car that has been scrapped do not fall within the scope of the used car margin scheme. However, they may be sold under the global accounting scheme5 (see V3.535).

Permitted circumstances

A supply of a used motor car is eligible to be made under the margin scheme if the taxable person took possession of the car pursuant to6

  1.  

    (1)     a supply in respect of which no VAT was chargeable; or

  2.  

    (2)     a supply on which VAT was chargeable on the profit margin; or

  3.  

    (3)     a “de-supplied transaction”, ie a transaction which is treated by

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