Used car buy and sell? Do I charge VAT for selling used car to my customers?

Guest007Guest007 Feels At HomeRegistered Posts: 54
Used car buy and sell? Do I charge VAT for selling used car to my customers?

Comments

  • LPalmerLPalmer Feels At Home Registered Posts: 25
    It depends whether you paid VAT when you bought the car originally.

    If you did then you will have to charge VAT when you sell it,

    Regards
    Lewis
  • Guest007Guest007 Feels At Home Registered Posts: 54
    If I am buying from the individual where I didn't pay VAT then I don't sell with VAT. it will be NET. right?
  • groundygroundy Trusted Regular Registered Posts: 495
    There is no VAT on cars unless you are a car dealer. I would be most concerned if you recovered VAT on a car purchase.
  • T.C.T.C. Experienced Mentor Registered, Tutor Posts: 1,448
    Might seem a strange question, but are you VAT registered? Do you have an accountant?
  • LPalmerLPalmer Feels At Home Registered Posts: 25
    Im guessing that you are a car dealer by the fact you were selling the used cars to your customers?

    http://www.hmrc.gov.uk/vat/sectors/motors/selling-cars.htm - I would recommend checking out this link for additional help.
  • LPalmerLPalmer Feels At Home Registered Posts: 25
  • LPalmerLPalmer Feels At Home Registered Posts: 25
    I found a link on the HMRC website... Hope this helps :D

    HMRC Link
  • peamanpeaman Well-Known Registered Posts: 123
    Do not charge VAT on sale, but you will have to pay VAT on the profit, under second hand scheme rules.

    Example - buy a car for £1000, sell for £1500, profit is £500. The £500 is deemed to be inclusive of VAT, so the VAT payable would be £83.33 (£500/6).

    Assuming you are VAT registered!
  • groundygroundy Trusted Regular Registered Posts: 495
    Do not charge VAT on sale, but you will have to pay VAT on the profit, under second hand scheme rules.

    Example - buy a car for £1000, sell for £1500, profit is £500. The £500 is deemed to be inclusive of VAT, so the VAT payable would be £83.33 (£500/6).

    Assuming you are VAT registered!

    This is only of you are a used car trader. If you are a normal business selling a car then there are no VAT implications
  • PGMPGM Font Of All Knowledge Registered Posts: 1,954
    groundy wrote: »
    This is only of you are a used car trader. If you are a normal business selling a car then there are no VAT implications

    I didn't know that, I guess that's because selling vehicles isn't part of your normal trade. Does the same apply to selling vans etc?
  • peamanpeaman Well-Known Registered Posts: 123
    It is the individual that is registered for VAT, not the business. If the individual is VAT registered they must charge VAT on all their business activities.

    The second hand goods scheme covers the selling of any second hand goods, not just cars.

    If the car was bought with the intention of selling on, VAT must be charged.
  • PGMPGM Font Of All Knowledge Registered Posts: 1,954
    It is the individual that is registered for VAT, not the business. If the individual is VAT registered they must charge VAT on all their business activities.

    The second hand goods scheme covers the selling of any second hand goods, not just cars.

    If the car was bought with the intention of selling on, VAT must be charged.

    Interesting to know. How does this differ if any for companies?
  • peamanpeaman Well-Known Registered Posts: 123
    Same rules apply, if a car or van was bought with the intention of selling on, it is a trading activity and VAT must be charged, if the business is VAT registered.

    However, new and second hand vans would have VAT included (unless bought privately) at purchase, so the second hand scheme will not apply and VAT must be charged on the whole sale price.
  • groundygroundy Trusted Regular Registered Posts: 495
    It is the individual that is registered for VAT, not the business. If the individual is VAT registered they must charge VAT on all their business activities.

    The second hand goods scheme covers the selling of any second hand goods, not just cars.

    If the car was bought with the intention of selling on, VAT must be charged.


    Completely agree but if the car was bought for business use and sold at a later date then there are no VAT implications. Maybe the OP could be a bit clearer about what they want to know.
  • peamanpeaman Well-Known Registered Posts: 123
    That's right. It is the purchaser of the cars intention that is important. Bought for business use, no VAT implications, bought with the intention of selling, VAT charged on sale.

    From the wording of the initial question, it appears that a car is being bought for resale, though it is somewhat vague!
  • stevo5678stevo5678 Well-Known Cheltenham Registered Posts: 326
    It is the individual that is registered for VAT, not the business. If the individual is VAT registered they must charge VAT on all their business activities.

    The second hand goods scheme covers the selling of any second hand goods, not just cars.

    If the car was bought with the intention of selling on, VAT must be charged.

    Yes but it is very difficult for HMRC to prove it was the businesses intention to sell on.

    Unless you are a car trader then the intention would not be deemed to be to make a profit.

    NO VAT CLAIMED WHEN BOUGHT = NO VAT PAID WHEN SOLD. It's that simple...Unless it is a car dealer or accountants have a habit of wanting clients to pay more to HMRC than they need to LOL.
  • peamanpeaman Well-Known Registered Posts: 123
    Again we come back to the vague wording of the original posting, which refers to selling a car to customers, which implies this will not be a one off transaction.

    Of course, if it is not a one off transaction it would be easy for HMRC to prove intention.

    It is of no relevance what the individuals trade is, if they are VAT registered and they bought anything with an intention to make a profit, VAT should be charged.

    I am just stating the rules, if it was my client and it was a one off transaction, I would advise them to keep the transaction out of the business books and regard it as a personal.
  • stevo5678stevo5678 Well-Known Cheltenham Registered Posts: 326
    Unless they have a habit of buying and selling cars it wouldn't be an issue at all...Unless the client wants to pay VAT.

    Plus if it went this route then there would be vat on the sale price not the profit. You need to be registered onto the margin scheme for vat, you can't just choose to apply it. If you are not on the scheme then you must apply standard vat.
  • peamanpeaman Well-Known Registered Posts: 123
    The original question refers to customers (plural), which would make it appear that it is not a one off transaction.

    There is no need to register for the VAT margin scheme any more, you can start using it anytime you like.

    You can also continue to charge standard VAT for your other supplies.

    It would be foolish to claim VAT on the sale price, when they can choose to use the margin scheme.
  • stevo5678stevo5678 Well-Known Cheltenham Registered Posts: 326
    The original question refers to customers (plural), which would make it appear that it is not a one off transaction.

    There is no need to register for the VAT margin scheme any more, you can start using it anytime you like.

    You can also continue to charge standard VAT for your other supplies.

    It would be foolish to claim VAT on the sale price, when they can choose to use the margin scheme.

    You are right you don't have to register but you do need to adopt it consistently (although you can choose to apply standard rules for individual transactions).

    However as far as I'm aware you cannot enter into the margin scheme unless your main trade is that of second hand products. IE unless car selling is their trade they cannot choose to 'dip in' and use the margin scheme to save VAT.

    Also if there was VAT shown separately on the original invoice you MUST apply standard VAT rules.

    I think the last issue supersedes my first point anyway.
  • peamanpeaman Well-Known Registered Posts: 123
    I haven't heard anything about your main trade having to be selling second hand goods to apply the margin scheme!!

    There is nothing in the HMRC guidance, it just says that you can use both the margin and standards schemes for different sales activities.

    We had a client that had a VAT inspection and they bought a few cars/vans on the side and I applied the margin scheme for these sales. Their main trade was buying and selling food (standard rated). I told the inspector I used the margin scheme for the vehicle sales, and he didn't have a problem with this.


    Yes, if bought with VAT, then VAT will need to be charged on sale price, but the car is being bought from an individual, so it will not include VAT.
  • stevo5678stevo5678 Well-Known Cheltenham Registered Posts: 326
    Fair enough, I just have't ever seen it applied in that direction, only the other way around. You can't argue with HMRC!

    It's a bit of a side argument anyway as this is only if they decide that they need to pay the VAT, which I don't think is an issue (unless they openly state that their intention was to make profit).
  • peamanpeaman Well-Known Registered Posts: 123
    Well, you can't automatically assume that the VAT inspector is correct, they can be hit and miss, just like the helplines, but I haven't seen anything in HMRC's guide saying you can't do this.

    I agree, I would advise the client to keep the transactions out of the books and ignore the whole VAT situation. If they buy and sell several cars and they want to take the risk of not declaring them, that's their choice. We can only advise them what the rules are.

    I am not sure how HMRC would prove intention to make a profit? Presumably, they would not register as the cars owner or have insurance for each car (just a general trade insurance), and the cars would not be in their possession for long. Each of which may imply that they never intended to keep the vehicle for themselves.
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