Legal Article - VAT

Qualifying Cars For Sale

A qualifying car is a vehicle on which VAT is charged. You will buy Qualifying Cars from leasing companies, hire fleets and other business users.

You may claim the VAT as input tax BUT you must pay VAT when you sell it.

Do not use the margin scheme for any vehicle on which you have been charged VAT.

Do not sign the invoice to confirm input tax has not been claimed as you would normally do for the margin scheme.

When you sell a Qualifying Car, follow the guidance below:

Advertise the car at its VAT-inclusive price. If you wish, indicate the car is a qualifying car by means of a car sticker.

If your customer identifies themselves as a business user, eligible to reclaim any VAT charged, you must issue a VAT invoice showing the full amount of VAT.

If you sell the vehicle to a person who cannot claim the VAT, such as a private person, your invoice must show a VAT inclusive price.

The amount of VAT is calculated by multiplying the sale price by the VAT fraction (i.e. 7/47ths)

If you use a qualifying car for private purposes, then you will have to repay the VAT claimed and the car must then be sold as a margin scheme car.

Commercial Vehicles

Used commercial vehicles may be sold under the margin scheme, as long as you are not charged VAT. If you are charged VAT then you must follow the guidance given above in respect of Qualifying Cars.


Published: 21 Mar 2011


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