How to work out the value of a vehicle for the second-hand motor vehicle payment scheme
Find out how to work out the value of a motor vehicle when calculating a payment using the second-hand motor vehicle payment scheme.
The second-hand motor vehicle payment scheme allows you to claim a VAT-related payment if you buy an eligible second-hand motor vehicle in Great Britain and:
- move that vehicle to Northern Ireland with the intention to resell it in Northern Ireland or to the EU
- export that vehicle to the EU with the intention to resell it in the EU or to Northern Ireland
Find out more about the scheme if you:
- buy second-hand motor vehicles in Great Britain to resell in Northern Ireland
- buy second-hand motor vehicles in Great Britain to resell in the EU
How to work out a payment amount for a vehicle
Your payment amount is calculated on the VAT fraction on the value of the vehicle that you purchased in Great Britain at the time that you move it to Northern Ireland or export it to the EU.
In most cases the value of the vehicle will be the full purchase price you paid for the vehicle.
You should not include any cost of bringing the vehicle to sale. For example, the cost of any repairs you have made.
Buying motor vehicles from an auction
If the auctioneer charges VAT separately on the hammer price of a vehicle you buy, you cannot claim a payment using this scheme.
When you buy a vehicle at auction, you will usually be charged an indemnity fee. You must not include this in your purchase price calculations.
How to work out the purchase price
Your purchase price will be the hammer price of the vehicle plus charges for services.
The invoice you get from the auctioneer will itemise the hammer price of the goods and any charges for services. For example, buyer’s premium. They will do this for each lot you have bought.
These charges must not show VAT separately.
This will be your purchase price, and you must show this amount in your record of vehicles purchased. It should be clearly identified on the invoice you get from the auctioneer.
If the auctioneer bills you for any other services, and charges VAT on them separately, you can reclaim the VAT under the normal rules. You must not add those charges to the purchase price of the vehicle.
If you are in any doubt about what your purchase price should be for a vehicle you have bought at auction, you should check with the auctioneer.
Buying from an online auction
If you’re buying a motor vehicle from an online auction, you must find out if the:
- seller is VAT registered
- vehicle is eligible to be sold under the margin scheme
Buying motor vehicles from an insurance company or finance house
If you buy an eligible vehicle as a result of an insurance claim, or from a finance house which has repossessed it, you will not be charged VAT if both:
- the vehicle is sold on to you in exactly the same state
- it was obtained by the insurance company or finance house from a person who would not have charged VAT on its supply (for example, a private individual)
When the value of the motor vehicle is not the purchase price
In most cases, the value of the vehicle to calculate the payment will be the purchase price paid for the vehicle (excluding any add-ons such as warranties or auction fees). However, in certain circumstances there are other factors that you will need to consider.
If there is a delay in moving the motor vehicle
In some cases, the vehicle’s value at the time it is moved to Northern Ireland or exported to the EU may be less than the purchase price.
This may occur where the vehicle is not moved promptly after purchase. For example, if you try to resell it in Great Britain first or use it for your own purposes.
If the motor vehicle is moved less than 3 months after purchase
If you move the vehicle to Northern Ireland or export it to the EU no later than 3 months after the date that you purchased it, you will normally be able to use the purchase price as the value of your vehicle.
If the motor vehicle is moved more than 3 months after purchase
If you move the vehicle more than three months after it was purchased, you will need to work out whether the purchase price still reflects the value of the vehicle when you move it.
You should revalue the vehicle and use the lesser of either the purchase price or the value at the time of the movement to Northern Ireland or export to the EU. The revaluation can be based on any arms-length commercial basis or trade valuation, provided it is fair and reasonable.
If the motor vehicle’s value increases before you move it
If the vehicle’s value increases before you move it to Northern Ireland or export it to the EU, you must use the purchase price as the valuation for the payment.
If dealer incentives increase the purchase price
The purchase price of the vehicle may also have been inflated by dealer incentives. This includes when a dealer:
- agrees to buy a second-hand vehicle for more than its trade value to encourage customers to buy a new car
- incentivises commercial buyers to take a fleet of cars
In such cases, the valuation for the payment must be the trade value only, with any additional charges excluded. The revaluation can be based on any arms-length commercial basis or trade valuation, provided it is fair and reasonable.
Where a dealer bulk purchases a fleet of cars for a single price but intends to resell them separately (for example, some in Great Britain and some in Northern Ireland), the price paid should be apportioned on a fair and reasonable basis. The price allocated to each vehicle must be as accurate as possible, excluding any incentive payments or add-ons.
If you buy a vehicle for resale and you surrender its unexpired road fund licence for a refund
You must not adjust the purchase price of the vehicle by the amount of the refund.