Legal Article - VAT

Demonstration Cars / Stock in Trade Cars

These rules take effect from 1 December 1999.

VAT can be recovered on stock in trade cars provided the following conditions are met:

1. The car can be temporarily made available for private use by employees;

2. You intend to sell the car within 12 months of purchase.

Please note additional VAT is due on the cost of making the car available for employees including depreciation, maintenance etc. even if a scale charge is paid.

When you sell the car, VAT is due on the full selling price.

Remember, VAT is not recoverable if the above two rules cannot be met.

If a car cannot be treated as ‘stock in trade’ because it does not fulfil the rules above, then when you sell the car, the sale is exempt from VAT. This may cause other problems in relation to the recovery of VAT on your purchases, depending on the amount of VAT exempt cars you sell.

If you have any concerns please Contact Lawgistics and we may be able to provide a health check to ensure the recovery of VAT on your VAT Return is correct.

Published: 21 Mar 2011

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