Legal Article - VAT

The Second Hand Car Margin Scheme

Applicable for business who sell second hand cars, enabling VAT to be payable via the Margin Scheme.

The following conditions must be met otherwise VAT may be calculated on the actual selling price of the cars:

Important areas of consideration are:

• Retain a Sales Invoice and Purchase Invoice for each vehicle

• Sales invoices must contain details of the vehicle sold

• Sales invoices must be endorsed with the customer’s signature, confirming his purchase of the vehicle at the price stated.

• Purchase invoices must contain details of the vehicle purchased, with the seller’s signature agreeing to the sale of the vehicle at the price stated.

• You must sign a statement on your sales invoices declaring (if appropriate) ‘Input tax deduction has not been and will not be claimed by me in respect of the car sold on this invoice.’

• Maintain a stock book, recording all vehicles bought and sold.
Your Stock Book must include full details of all vehicles sold under the margin scheme, with the sellers’ and purchasers’ names, the purchase price, the selling price, the margin and the VAT amount due.

Invoices and stock books may be obtained from Lawgistics.

Do not reduce the margin by any repairs to the vehicle, or by any other costs.

Do not use the margin scheme for any vehicle on which VAT was recovered on purchase.

Frequently asked questions:

What do I do if I am buying a vehicle from a private person who can’t raise a sales invoice to me?

You must check the goods are eligible for the scheme and make out your own purchase invoice and obtain the seller’s signature, date of transaction and certification that he/she is the seller of the goods at the stated price.

Does this apply to motorbikes?

Yes – the provisions applying to cars equally apply to motorcycles.

Does the margin scheme apply to commercial vehicles?

Used commercial vehicles may be sold under the margin scheme, as long as you are not charged VAT.

Published: 21 Mar 2011

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