What Are ‘VAT Qualifying’ Cars?
Find out how VAT affects you when buying a used car or van and how you can reclaim VAT on vehicles after completing a purchase.
Cut through the jargon and urban mythes about this sometimes complicated subject with our experts.
What is VAT Qualifying?
Are you looking to buy a used vehicle? If so, you are likely to have come across the mention of ‘Non VAT Qualifying’ or ‘Margin Scheme’. But what does it mean and how does it affect you as a seller or buyer?
- When a vehicle is bought as new, VAT must be paid to Customs & Excise by the dealer
- If the buyer is VAT registered, they may be able to claim back the VAT following their purchase (depending on the type of vehicle and VAT scheme). The vehicle is now deemed to be ‘VAT Qualifying’
- If the buyer does not reclaim the VAT, the vehicle becomes ‘Non VAT Qualifying’ or a ‘Margin Vehicle’
- When a ‘VAT Qualifying’ car is subsequently sold, the VAT registered seller is obliged to charge VAT on the sale price and return this to Customs & Excise
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VAT implications when you are VAT registered
Buying a new vehicle:
- The customer buys the vehicle from dealer at a price including VAT
- The dealer pays VAT to Customs & Excise
- The buyer may be able to reclaim VAT from Customs & Excise. This would then become a ‘VAT Qualifying Vehicle’
- When sold on, VAT must be charged on top of the selling price and subsequently paid to Customs & Excise
Buying a used vehicle:
- If VAT has previously been paid to Customs & Excise for the vehicle and not recovered the vehicle is ‘Non VAT Qualifying Vehicle’ or a ‘Margin Vehicle’ and there is no VAT chargeable on the vehicle
- If the vehicle is ‘VAT Qualifying’ then the VAT content may be able to be reclaimed by the buyer after purchase. In this case the vehicle remains a ‘VAT Qualifying Vehicle’. If the VAT is not recovered then the vehicle becomes a ‘Non VAT Qualifying Vehicle’
VAT implications when you are NOT VAT registered
Buying a new vehicle:
- The customer buys the vehicle from dealer at a price including VAT
- The dealer pays VAT to Customs & Excise
- The vehicle no longer attracts VAT and if subsequently sold, VAT should not be charged. This is called a ‘Non VAT Qualifying Vehicle’. This vehicle can never attract VAT in the future
Buying a used vehicle:
- The customer buys vehicle from private seller or dealer with or without any VAT content
- As with a new vehicle the customer is unable to recover the VAT
For further information take a look at the Customs and Excise website via the link below.
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