V6.312 Liability of supplies and activities of motor dealers

Part V6 Business by business

V6.312 Liability of supplies and activities of motor dealers

Motor dealers

V6.312 Liability of supplies and activities of motor dealers


The activities of motor dealers typically range from sales of new and used cars to servicing, repairs and sales of spares and accessories. E-commerce also plays an important role in the sector with many dealers using websites exhibiting details of new and used cars and third party websites routinely introducing customers to dealers, or even offering to source cars from overseas.

Sales of motor cars represent a substantial part of economic gross domestic product with the total revenue collected by way of VAT, corporation tax and income tax being a major source of income for the Treasury. It is not surprising, therefore, that HMRC pay detailed attention to this industry sector.

A key element of the business of motor dealers is the sale of motor cars. The VAT liability of the supply of a motor car depends on whether it is new or used and, if it is used, whether or not the seller was able to recover any input tax. Motor dealers therefore have to maintain separate systems for new cars, second-hand cars on which input tax has been restricted and second-hand cars on which it has been recovered. Stock-in-trade cars also have their own set of VAT rules.

Definition of a motor car

The definition of a motor car for VAT purposes is set out in V1.293.

Sale of new motor cars

New motor cars will normally be liable to VAT at the standard rate when supplied for use

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