Selling second-hand vehicles using a VAT margin scheme
If you sell second-hand vehicles, find out how to use a margin scheme to account for VAT (VAT Notice 718/1).
There are different rules if you buy second-hand vehicles under a margin scheme.
Selling vehicles under the scheme
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Check you followed the scheme rules when you bought the vehicle.
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Check any linked insurance products and warranties.
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Make out a sales invoice and enter the details in your stockbook.
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Give the invoice to your customer and keep a copy in your records.
If the second-hand vehicle is to be sold at auction you must check with the auctioneer before the sale has gone through if it is to be treated under the auctioneers’ scheme or the VAT margin scheme.
Check the rules for selling
Making occasional sales
If you’re not in business to buy and sell second-hand vehicles, but find yourself with an eligible vehicle to sell and you would like to use the scheme for the sale, then you do not need to comply with the full record-keeping requirements, provided you:
- meet the other conditions of the scheme
- hold evidence of the purchase and selling price
Selling a vehicle and arranging hire purchase
The values shown on any documentation raised to the finance company must be the same as the values declared to HMRC in your books and records. This includes the value of any part-exchange vehicle or cash deposit paid by the customer.
Vehicles you have rebuilt
You can sell a vehicle under the scheme when:
- you’ve built it from used vehicles bought under the margin scheme rules
- it does not need to be re-registered with the Driver and Vehicle Licensing Agency (DVLA)
If you construct a vehicle from the used components and parts of other vehicles, and the DVLA gives it a new registration number, you cannot use a margin scheme. You must account for VAT on the full selling price.
Selling vehicles adapted for a disabled person
You can sell the vehicle outside the scheme by closing its entry and noting the reason why in your stockbook. You can then raise an invoice for the vehicle in the usual way.
Selling vehicles for cash
Accepting cash payments for second-hand vehicles you sell will not affect your scheme calculations. However, if you sell a vehicle for the equivalent of 10,000 euros or more in cash, you will need to register with HMRC as a high value dealer.
Vehicles given as a gift
Gifted vehicles cannot be sold under a margin scheme. You must account for VAT on the full selling price.
If you give away a vehicle which would have been eligible for sale under the scheme, no VAT is due. You must include full details of the person you gave the car to in your stockbook.
Selling a vehicle privately
The private sale of goods which are not assets of your business are usually outside the scope of VAT and no VAT is due.
However, you can use the scheme for the sale of an eligible vehicle if you:
- are a sole proprietor
- sell an eligible vehicle, which you transfer to your business from your private holdings
You must be able to have evidence of the purchase price when you bought it for your private use. If you cannot do this, you must account for VAT on the full sales value.
Further information
You must show any vehicles you sell using a margin scheme on your VAT return.