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VAT treatment on cars

Discussion in 'Motors' started by doopydug, 18 May 2006.

  1. doopydug


    Joined: 18 Oct 2002

    Posts: 2,596

    Location: Fife

    I know that there is 17.5% vat included in the cost of a new car but does a 2nd hand car also attract a charge for vat?

    I am not sure but i think it just applies to new cars?
  2. Fishman

    Wise Guy

    Joined: 19 Oct 2002

    Posts: 1,021

    Location: Welwyn Garden City

    VAT as you know is charged on nearly everything new you buy, but once it has been paid there is no more VAT on the item. You might sell the car 1 day after owning it and would charge a price lower than you paid but probably not less than the before VAT price. There would be no actual VAT payable by the new owner but you would be passing on your paying of VAT to them based on the price
  3. Maz


    Joined: 18 Oct 2002

    Posts: 7,387

    Location: Newcastle.

    Sometimes second hand cars also attract VAT.

    I know when we buy used cars from Fiat we pay VAT on them.
  4. blueboy2001


    Joined: 18 Oct 2002

    Posts: 4,881

    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 :)
  5. aztechnology


    Joined: 12 Aug 2004

    Posts: 2,503

    Location: Oop North

    I thought the Margin Scheme made VAT payable on the difference between the Purcahse and Selling price for a 2nd hand good, this allows purvetors of 2nd hand goods to claim the VAT back they effectively paid to get the 2nd hand good. It a volunatary scheme, but if you don't use it, I think VAT is due on the full selling price. I'm not a VAT man though so I'm not 100% on this

    It's all On the HM customs site