Value Added Tax

Margin scheme ― second-hand motor vehicles

Produced by Tolley
  • 26 Nov 2021 12:40

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

  • Margin scheme ― second-hand motor vehicles
  • Conditions
  • Eligible vehicles
  • Online auction sites
  • Northern Ireland
  • Buying from EU dealers
  • Buying a second-hand vehicle from Great Britain
  • Selling a second-hand vehicle to purchaser in Great Britain
  • Calculating the margin
  • Record keeping requirements
  • More...

Margin scheme ― second-hand motor vehicles

This guidance note provides an overview of the margin scheme that can be used for selling second-hand motor vehicles (‘vehicles’). 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 vehicle it may be beneficial for it to use the margin scheme when it sells the vehicles for the following reasons:

  1. there is no requirement to charge VAT on the full selling price of the vehicle as VAT is only due on the margin

  2. if the business does not sell the vehicle at a profit no VAT will be due on the sale

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

Business are not required to use the margin scheme and the business can elect to sell the vehicle under the scheme or outside of the scheme where preferable. However, if a business makes a decision to sell the vehicle 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 vehicle and should not be included in the margin scheme calculation.

Conditions

Please see the VAT (Cars) Order 1992, SI 1992/3122, Article 2 and VATMARG08100 for a

Access this article and thousands of others like it
free for 7 days with a trial of TolleyGuidance.

Think Tax.
Think Tolley.

Critical, comprehensive and up-to-date tax information

LEARN MORE LEARN MORE

Popular Articles

Capital vs revenue expenditure

Capital vs revenue expenditureExpenditure of a capital nature is not allowed as a deduction when calculating trading profits. Expenditure of a revenue nature is allowable, provided there is no specific statutory rule prohibiting a deduction and the expenditure also satisfies the wholly and

25 Oct 2021 07:01 | Produced by Tolley Read more Read more

Effective tax rate planning

Calculation of the effective tax rateAn international group’s effective rate of tax is usually calculated as the amount of tax it pays divided by its consolidated profits. The effective tax rate depends largely on:•the rate of tax paid by each company in the group•the companies in which profits are

03 Nov 2021 16:11 | Produced by Tolley in association with Anne Fairpo Read more Read more

Winding up a trust

When does a trust come to an end?A trust may come to an end because it has run its course and comes to a natural end. If a trust has no assets , it ceases to exist. Alternatively, a trust ends because the trustees or beneficiaries decide to wind it up: the trustees distribute the assets by

03 Nov 2021 11:52 | Produced by Tolley Read more Read more