Margin scheme - second-hand motor cars

By Tolley
Margin scheme - second-hand motor cars

The following Value Added Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Margin scheme - second-hand motor cars
  • Conditions
  • Steps required when buying and selling cars under the scheme
  • Calculations
  • Record keeping requirements
  • Insurance and warranties
  • Auctions
  • Other considerations

Value Added Tax (Cars) Order 1992, SI 1992/3122, Article 8; VATA 1994, s 50A(4); 2006/112/EEC , Articles 312–341; Notice 718/1 ; VATMARG08000

This guidance note provides an overview of the margin scheme that can be used for selling second-hand motor cars (‘cars’). It should be read in conjunction with the Overview of margin schemes and Operating the margin scheme guidance notes.

If a business purchases a second-hand car it may be beneficial for it to use the margin scheme when it sells the cars for the following reasons:

  • there is no requirement to charge VAT on the full selling price of the car as VAT is only due on the margin
  • if the business does not sell the car at a profit no VAT will be due on the sale

Please note that only second-hand cars can be sold under the margin scheme. The scheme cannot be used if VAT has been reclaimed on the purchase of the car.

Business are not required to use the margin scheme and the business can elect to sell the car under the scheme or outside of the scheme where preferable. However, if a business makes a decision to sell the car outside of the scheme, it cannot subsequently amend the sale to bring it within the scheme.

Businesses using the scheme are still entitled to recover VAT incurred on general overheads, etc in the normal way. These costs should not be added to the cost of the car and should not be included in the margin scheme calculation.


Please see The VAT (Cars) Order 1992 (SI 1992/3122), Article 2 and VATMARG08100 for a definition on what is deemed to be a ‘car’ for VAT purposes.

Businesses wishing to use

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