Maz said:
I know when we buy used cars from Fiat we pay VAT on them.
In some circumstances you will pay VAT on a second hand car.
In the case of manufacturers who use cars on their own fleets then offload them, they will have to charge VAT at the point they are sold.
Hire fleets and leasing companies claim VAT back on cars they buy for the fleet. When they are subsequently sold on VAT must be paid on the purchase price. These are described as VAT Qualifying cars and traders like them because they are effectively cheap stock - if a trader buys a nearly new BMW at auction for £25k hammer price, that will be taken as £25k inc VAT. Whilst its sat on his forecourt he can claim the VAT back (£3723.40) and the car stands him the ex-VAT price. Buy at the end of the VAT quarter, claim the VAT back, sell it a week later for £27k and you have £3.7k of HMRC's money to help your cashflow until the end of the next VAT quarter