Clearnly not when they are sold privately... But when a dealer sells a second hand car - does he have to pay VAT on it?
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Clearnly not when they are sold privately... But when a dealer sells a second hand car - does he have to pay VAT on it?
Yes, I believe so.
Yes if the seller is a company and thus vat registered they have to pay the vat to the tax man (and thus charge it you).
hold on guys.
First....if a car is sold from new to a VAT registered company that CAN CLAIM VAT back on cars (ie lease companies, and rental companies) then YES the car is called a Qualifying Car. When it is sold it is sold with a vat receipt...
so if the car is £8995 its really £7655.32 + vat
Once it is sold to the next person if they are private owners the vat is gone forever. If it is sold to ANOTHER company that CAN CLAIM VAT back on a car, ie another rental company they claim it back again for cash flow...untilit is sold again. Same as above.
If it is a VAN it is ALWAYS claimable by any vat registered comany if they want.
VAT is always paid on the PROFIT of the car..different thing totally.
I'll answer what ya need
....on the profit of a secondhand car, do you mean? If so it's similar to (or the same thing as) the 'margin scheme' by which we used to sell secondhand cameras when I worked for Jessops. VAT was payable on the price difference between what we'd paid for the camera and what we'd sold it for. Inland Revenue rules meant that we could not disclose our profit to the customer, and they could not claim VAT back on secondhand items even if they were VAT registered.Quote:
Originally Posted by Zak33
Rich :¬)
My question has been answered, thanks.
Was just wondering if dealers had to pay tax on top of purchace price. I.e. they have to pay for car, maybe fix it a bit, and get some profit. If they had to pay vat on top that would make their car prices quite amazing, but it doesn't. :D
Used car Garage buys a car...pays £6000 for it. No vat .....its a private blokes car, like 99% of the ones out there.
He services it to get it up to scratch....£100
He gets a pro valeter to clean it....£50
Advertises it in 2 places ..... £50
He puts it on the forecourt at £7000
When a customer sees it and likes it, and bids £6800, the salesman says "yeah, deal, collect it tomorrow"
Invoice looks like this
£6800 for used car (no vat showing)
Sold...man pays and off he goes.
Dealer sits in office and works out the following.
Cost of car....£6000 + £100 service + £50 valet + £50 to adveritse it = £6200
BUT VAT MAN SEES
Original cost of car = £6000 Total sale price £6800 profit margin for vat is £800
Pay VAT on the profit.....800 divided by 6.71429 (that takes the vat out of the 800) = £119.15vat
So he spent £6000 + 100 + 50 + 50 + 119.15
So to the sales man car owes £6319.15 and he got £6800 so he made £480.85
So its easy for what LOOKS like a £1000 profit margin to actually only make £480
And we haven't covered warranties either.
The sales man actualy paid vat on the service and the valet, but claimed it back as he's vat registered.
But when it comes to the car he pays the vat anyway....cant escape it legitimately :(
secondly: Garage buys a car for £6000 and spends same on it, but it sticks for a year and eventually they get £5850 for it.
No vat rebate :(
all costs still exist.
Dead loss.
Happens a fair bit :(
Excuse my ignorance but trying to identify where the paying on vat finishes on a second hand car. Dealership has pre-registered a car and is now selling to to the public. Should the car be now free of VAT and it is now secondhand or can they still charge VAT?
VAT charged on profit that the dealer makes from buying to selling. See margin scheme: http://www.hmrc.gov.uk/vat/start/schemes/margin.htm