Car import/export and VAT

[KaeptnNemo]

Hey folks!

 

I need some clarification and I hope you can help me.

Since Brexit, things are getting complicated.

When I order spare parts, VAT is beeing deducted/not charged in the UK and I have to pay 19% taxes when importing it into the EU. So far so good.

But what about complete cars? If I buy one at a dealer, is he able do sell it without VAT (20% less/cheaper), or do I have to pay taxes twice?

Any help appreciated!

 

Cheers,

 

Patrick

 

[mike_sekinger]

Buying and selling cars (europa.eu)

You should not pay VAT in the UK, but seems that you are likely to be due to pay import duty + local VAT

[KaeptnNemo]

Thanks Mike for the article. Reading it, it seems obvious, that VAT is not due in the UK whe proof of export can be made. But is a regular preowned car deal in the UK an invoice with VAT? I haven't done that before!

I am sure, I have to pay local tax and customs, but I was not sure, if the UK dealer discounts the VAT or not....

I guess it is necessary to contact the specific car dealer, if he is used to the procedure or not... 😕

 

[exeterjeep]

Also have a look at https://www.mycarcredit.co.uk/is-there-vat-on-used-cars-in-the-uk/

Generally s/h cars have no VAT, unless the previous keeper was VAT registered and reclaimed the VAT for their business. Generally this is the case for vans /lorries /commercials .

Or are you looking at a new car, then things may be different.

 

[KaeptnNemo]

just to verify if I got it right...

when buying from a dealer, the dealer has to pay VAT for that deal if the car stays in the UK.

So, I guess when it leaves the UK, no matter if he uses second hand margin scheme or full VAT on selling price, there might be 20%-ish room for bargaining if the car goes into the EU ?!

 

 

[madmax]

As far as I'm aware, there is NO VAT element on used cars in the UK, whether for sale privately or from a dealer.

A dealer would pay VAT on the difference between his buying in price and his selling price which is why they sometimes 'back VAT' cars that are being part exchanged as it makes them a VAT saving (complicated).

There is of course an exception as some used cars are classed as 'VAT qualifying' cars and as such can be leased with VAT being claimed back on rentals if they're for business use.

BUT, in general terms, on a USED vehicle in the UK, there is no separate VAT liability for the purchaser.

I hope that hasn't complicated matters for you 😀

[KaeptnNemo]

OK; thanks for the explanation...

no room for saving money

 

[madmax]

It depends what you can negotiate - the smaller the margin between what they bought it for and what they sold it for is what they pay (and claim) VAT on. The smaller the margin, the smaller their VAT liability.

I can't remember how it works if they in fact show a loss (at least on paper).

Good luck with your negotiations 👍

[Bibs]

I believe the dealer pays VAT on their margin on 2nd hand cars but it's not payable by the customer so not reclaimable. @Guy Munday may offer a little more insight if I've got it wrong, he explained it to me many years ago!

[Guy Munday]

So no VAT is payable by the buyer on a used vehicle (unless it is VAT qualifying; we'll save that for another day).

The dealer is, however, required to pay VAT on the difference between the buying and selling price (regardless of any expenses incurred along the way).

If selling overseas (and that now includes Europe), the seller can zero-rate it if it is being invoiced to a company with an overseas VAT number. If no VAT number is available, other proofs of export (proof of shipment, Bill of Lading) are usually good enough to zero-rate. It's then a question of whether the dealer wants to pass some or all of the saving on to the buyer, I guess 🙂.

[Steve V8]

A new car is subject to VAT a used car isn't, a VAT registered company (such as a car dealer) will pay 20% on his prophit when he submits his VAT return, regardless how its earned.

This has always baffled me because, as soon as you drive your new Lotus Emira (or any car) out of the showroom it should be worth 20% less.

7 hours ago, Guy Munday said:

The dealer is, however, required to pay VAT on the difference between the buying and selling price (regardless of any expenses incurred along the way).

But he can claim back the VAT on those expenses. 

Also if he makes a loss in his VAT period HMRC will pay pay back 20% on that loss.

[Guy Munday]

Yes you can claim back the VAT but not the actual expense.

If I buy a car for £10k and sell it for £12k, I will pay VAT on the £2000, no questions asked. If I spent £600 +VAT (£720) getting it serviced, I can claim the £120 Vat back but I have still spent the £600 and cannot offset that against the car margin. £2000 worth of Vat paid, even though the profit is only £1400.

Simplified example, I know. 

[Escape]

In your example, you only pay £400-£120 VAT, which is consistent with the actual profit of £1400.

Or am I missing something?