VAT on a used car?

[GLENT54321]

Hi, 

 

Really confused over VAT rates on used cars. 

 

Were looking at buying a second hand car, the invoice has 20% sale vat on it for the car broken down as so:

 

Car - £6822

VAT - 1137

 

I though the vat rate was only applied , on a used car, to the profit margin on the car, as VAT has already been payed on it when it was first registered (assuming it went to a VAT paying customer).

 

So, in theory, im paying VAT again for the whole car ATM

 

Anyone a little wiser?

 

p.s im a private buyer and the car was originally owned by a private buyer (through finance).

 

 

 

[James I]

I believe the car should be VAT free. If it is a commercial, van or pick up type car then VAT applies. Interesting to see if anybody says different.

[littleade]

Me too as I thought the same as you- i.e. the VAT was only applicable to the profit the dealer was making, not the full price. Hopefully someone can let us know.

[GLENT54321]

Me too as I thought the same as you- i.e. the VAT was only applicable to the profit the dealer was making, not the full price. Hopefully someone can let us know.

 

IF this is the case i shall be having words with the seller ( carshop.co.uk)

 

The only way i can think im paying VAT for is:

 

The car was actually owned by a finance dealer who would of given the full price including VAT on finance, then they claim the VAT back as there a business? that make sense?

 

Also is the VAT rate 20%? thought it was 17.5%??

[Wardy]

What was the actual screen price on the car you've bought?

[rover220]

 

 

Also is the VAT rate 20%? thought it was 17.5%??

really?

[James I]

Looky here as all the VAT rules are HERE

 

20%

[Paul007]

No it's 20%. http://www.hmrc.gov.uk/vat/sectors/motors/index.htm

[GLENT54321]

What was the actual screen price on the car you've bought?

 

The price in the window was £6773

 

 

really?

 

What? simple question...i don't really pay that much attention to it.

[GLENT54321]

No it's 20%. http://www.hmrc.gov.uk/vat/sectors/motors/index.htm

 

Cant make any sense out of it! Dosent really explain if i pay full VAT or VAt on the profit margin.

[Wardy]

The price in the window was £6773

 

Was there also a £49 admin charge to pay? Giving you a total of £6822.

 

Looks like they've simply provided you with a VAT breakdown, showing what proportion of the £6822 is VAT. You'll see it presented in this way on quite a number of receipts. Crucially it does NOT affect the amount you're paying for the item.

 

You're paying £6822 for the vehicle, which you're clearly happy with, otherwise you wouldn't be buying it. So really, it's of no consequence to you how much of that purchase price is made up of VAT. That's the way I'd look at it anyway.

[slider]

 

 

Also is the VAT rate 20%? thought it was 17.5%??

 You are almost 2 years behind the times.

 

Also if you agreed a price with the dealer it should not matter to you what the VAT portion is - unless you are a business and in a position to reclaim this.

[GLENT54321]

Was there also a £49 admin charge to pay? Giving you a total of £6822.

 

Looks like they've simply provided you with a VAT breakdown, showing what proportion of the £6822 is VAT. You'll see it presented in this way on quite a number of receipts. Crucially it does NOT affect the amount you're paying for the item.

 

Ye its showing that out of the £6822 (£49 admin) £1137 is VAT But that VAT is applied to the whole price of the car 

 

I shouldn't be paying VAT on the whole price of the car, only on the profit margins of the seller as the VAT was payed by the first owner when new.

 

 You are almost 2 years behind the times.

 

Also if you agreed a price with the dealer it should not matter to you what the VAT portion is - unless you are a business and in a position to reclaim this.

 

Im not a buiness so not able to reclaim, but surely it does matter to me how much VAT i pay because even thought the VAT goes to HMRC it means they will get more than they should be.

[GLENT54321]

i found this searching google for the answer:

 

http://www.thisismoney.co.uk/money/experts/article-1630721/Do-I-have-to-pay-VAT-on-a-second-hand-car.html

 

It would effect the total price i pay for the car because im paying VAT on the full price (£6822) and not on the profit margin 

Edited 22 October, 2013 by GLENT54321

[Wardy]

I can understand where you're coming from, but you're opening a whole can of worms there on how the VAT system should, or shouldn't work.

 

Basic fact of the matter - VAT is due against the total price of the vehicle you're buying, as you're buying the car from a trade seller.

[devonutopia]

Car - £6,822 - this is inclusive of VAT at 20%

 

VAT - £1,1.37

 

Net cost - £5,685

 

So if you happened to be a VAT registered business, you could claim back that £1,137 as input VAT.  However, most businesses wouldn't buy a car as generally they are not tax favoured - poor capital allowances etc.

 

So, in reality, this car's cost is actually £5,685 but the motor dealer is charging £1,137 on top which it will pay over to HMRC in theory as output VAT.  However, why the hell they don't use the margin scheme I don't know.  For example, if they had paid £4,000 for it, and advertised it for £6,822 - they would only pay 20% VAT on the £2,822 profit = £564.40, not the way done in your case where they pay about double that - £1,137.

 

That is however down to them, and as the non VAT registered purchaser, you just see "£6,822" paid in total, and that's that.

[moley]

So if you happened to be a VAT registered business, you could claim back that £1,137 as input VAT.  However, most businesses wouldn't buy a car as generally they are not tax favoured - poor capital allowances etc.

You can't claim the VAT back as a business unless the car is used exclusively for business. Taxi's and car rentals can get the VAT back.

I buy my cars for my business and I can't claim the VAT back, if it was a van I could get the VAT back. 

[devonutopia]

You can't claim the VAT back as a business unless the car is used exclusively for business. Taxi's and car rentals can get the VAT back.

I buy my cars for my business and I can't claim the VAT back, if it was a van I could get the VAT back. 

 

Yup - unless you can show the car is a pool car, not kept at a private address out of hours, then yep, no VAT.  I have a vague memory of somehow being able to claim half back, but I don't remember under what circumstances that was.

[Brimma]

 

 

You're paying £6822 for the vehicle, which you're clearly happy with, otherwise you wouldn't be buying it. So really, it's of no consequence to you how much of that purchase price is made up of VAT. That's the way I'd look at it anyway.

 

Exactly

 

It's just the same when part-exchanging really, it doesn't matter a bean what the price of the new vehicle is and what price they give you for your vehicle, it's the cost to change which is important

[BossFox]

The price to you is the price.

 

Does it matter how much of the ticket price is VAT if you are happy to buy the car for the ticket price and can't claim VAT back?

If so why?

 

Do you dislike HMRC and not want them to get over £1000 from the sale?

If so buy a different car.

 

Yes, second hand cars can qualify for VAT sometimes.

Bit of a shocker, but there you go.  It's still going to cost you the same price...

[cheezemonkhai]

Yup - unless you can show the car is a pool car, not kept at a private address out of hours, then yep, no VAT.  I have a vague memory of somehow being able to claim half back, but I don't remember under what circumstances that was.

 

Just going through this for a company car and yes you can claim 50% of the VAT on the car price back depending on the level of personal/business use.

Also if you buy services, such as maintenance/tyres on a vehicle you can claim the VAT back on those fully.

 

It's not what you'd call simple.

[Penpusher]

A car is a VAT qualifying car, ie it carries VAT on the total price and not just the margin, from new until it ceases to qualify, ie when it is bought or used for private journeys.  A new car sold to a hire firm or a company for purely business use will be a qualifying car and they can recover the VAT on the purchase price but must recharge it when they sell it.  Even when it becomes used, it can remain as VAT qualifying.

 

A motor dealer buying a VAT qualifying car will recover the VAT when they buy it, but must charge VAT when they sell it.  The total price they sell at will be the market price for the car, which is the same price as if it is a margin car.  The cost of VAT to a dealer on a qualifying car is the same as a margin car in the end, but the advantage for them is that they can recover the VAT when they buy it, so if it is in stock at the end of a VAT period, they gain a cash flow advantage.

 

There is a risk of losing out on any VAT qualifying cars in stock when the VAT rate increases.  The last time it increased, they would have recovered VAT at 17.5% on the purchase, but then had to charge VAT at 20% on the sale, but the sale price is only based on Glasses Guide or CAP Black Book which does not increase overnight when the VAT rate increases.

 

Many dealers do not show the VAT on the sale invoice to a private individual of a VAT qualifying car to avoid confusing the customer.

 

The important bit is that the screen price you pay should be a fair market price for the car according to age, condition, etc.

[mdon]

I think it'll be because carshop.co.uk doesn't own any cars that it sells, they belong to someone else, they just act as a agent and all the cars they sell are mostly ex company cars so the VAT will have been claimed back when the original company bought them hence why you are paying the VAT now. Just the same as buying a commercial vehicle.

If you're not happy with the price ie don't want to pay the VAT, try and find one cheaper elsewhere, I bet you can't!

[Brimma]

Possibly another "I wish I'd never started this thread" moment?

[Wardy]

Now where did I put that 'unsubscribe' button??