Gazellio wrote:

Dogman wrote:

Hi Guys

Can anyone explain why, it seems, in the motor industry VAT is only added to the margin on a vehicle?

If I buy an item in then resell I pay VAT on my purchase price then charge VAT on my sell price, not VAT on the margin I apply to the item?

Just asking out of interest, or have I got this completely wrong?


Thx

The scheme is designed to ensure fair VAT payment due to the fact that VAT is not added to used car prices and is therefore not collected in the same way as goods sold as say £3000 + VAT.

As a normal RETAILER (not used car dealer) you reclaim the VAT paid on acquiring goods you are actually only paying VAT on the margin or profit that you make.

Buy good for 10k + VAT (Reclaim 20% £2000) Sell at 12K + VAT (Pay VAT man 20% £2400)

Therefore you have effectively paid £400 equivalent to 20% of the MARGIN or profit.

Therefore the car scheme is identical it just calculates in a different way.

Also not all cars sold are "MARGIN" some are "QUALIFYING" (Business relief available) and attract VAT in the normal RETAIL manner but same amount is paid as stated above.

Hope that helps

"PLUS VAT" cars will be "Qualifying" which means they started life as being semi-commercial or sold as part of a fleet or lease scheme. This means the Company leasing the cars can claim back the VAT. They remain "Qualifying" until they are sold to a PRIVATE owner when the then become MARGIN cars.

Plus VAT cars will have the VAT added to the purchase price that you pay. In effect dealers showing a price before VAT are just trying to make it looker cheaper - THE REAL PRICE INCLUDES THE VAT.

MARGIN VAT is not added to the purchase price its is just a way of calculating how much a dealer pays the VAT man. As said earlier the amount paid is the same regardless of car class. Used Margin cars bought by a business do not allow for VAT reclaim.

So to recap - All dealers pay the same total VAT on used car sales. Cars that where originally registered for business use are "qualifying" until sold to a private buyer. (VAT shown seperately) All other cars are Margin for calculation purposes.

Gazellio wrote:

"PLUS VAT" cars will be "Qualifying" which means they started life as being semi-commercial or sold as part of a fleet or lease scheme. This means the Company leasing the cars can claim back the VAT. They remain "Qualifying" until they are sold to a PRIVATE owner when the then become MARGIN cars.

Plus VAT cars will have the VAT added to the purchase price that you pay. In effect dealers showing a price before VAT are just trying to make it looker cheaper - THE REAL PRICE INCLUDES THE VAT.

MARGIN VAT is not added to the purchase price its is just a way of calculating how much a dealer pays the VAT man. As said earlier the amount paid is the same regardless of car class. Used Margin cars bought by a business do not allow for VAT reclaim.

So to recap - All dealers pay the same total VAT on used car sales. Cars that where originally registered for business use are "qualifying" until sold to a private buyer. (VAT shown seperately) All other cars are Margin for calculation purposes.