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VAT exporting second hand cars

VAT and Exporting Second-Hand Cars

Second-hand cars and VAT has always being a bit different to normal VAT…and now the rules are changing for VAT and exporting second hand cars from the UK to the EU.  The rules don’t actually change until 1st October 2022 and, with typical HMRC style, full details are not available yet and are apparently due to be published in May.  The new rules are the ‘second-hand motor vehicle export refund scheme’.

There is a slight difference between exporting to Northern Ireland and the EU countries that you should be aware of.

Dealers in second-hand vehicles can currently use the VAT margin scheme and only charge VAT on their profit, rather than on the full sale price of the vehicles.   That isn’t changing for UK sales, but it is for exports to the EU and to Northern Ireland.

Sales to Northern Ireland

For sales to Northern Ireland, after the start date in October, a car dealer will not be allowed to use the margin scheme.   VAT will instead by accounted for on the full value of the supply of the exported vehicle.   The good news for car dealers is that the Northern Ireland purchaser will be able to reclaim the full amount of the VAT … if they are a car dealer and the plan is to resell the car.   The bad news is that if they are selling the car to an ordinary business or individual, that VAT is chargeable on the full value of the supply.  However, this will then mirror the VAT treatment in Northern Ireland.

Sales to EU Countries

For sales to EU countries, the VAT on the sale is subject to the rules that apply in the EU country to which the sale is made…however if you apply for a refund of VAT, the amount of refund available is limited to the UK VAT element of the vehicle.  Car dealers intending to resell the vehicle in the EU may claim a refund.

Now, that wasn’t complicated was it!   If you would like more information then please get in touch … but not until HMRC have released the detailed information about VAT and exporting second hand cars, which is likely to be in May 2022.

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