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 Topic: VAT on secondhand caravans
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09/11/2015 at 5:58pm
Location: norfolk
Outfit: Bailey Pageant Burgundy 6 volvo V70
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fURTHER TO MY FIRST POSTING ..JUST READ THIS ... have recently read that VAT is not charged on the purchase of a second-hand car but only on the dealer's profit element. However, when I bought a second-hand Vauxhall from a car supermarket for £6,378.72, the invoice showed a VAT charge of £1,133.63. Can this be correct? H.W., Hull
Margaret Stone, the Daily Mail's Money Doctor, replies: There are two ways in which motor dealers handle VAT on used vehicles. Some charge VAT only on the profit they make on the sale of the car. This is known as the second-hand margin scheme, used by most car dealers.
Alternatively, they can charge VAT on the total transaction cost - that is the second-hand selling price achieved. It depends on how they choose to keep their records.
The second-hand margin scheme requires more paperwork-from the dealer. He must, for example, keep the relevant stock books which include details such as the car's engine number.
Each method of charging VAT is legal, and HMRC is concerned only that the dealer tells them which scheme he is using.
There is no obligation for the dealer to tell the customer at the outset which method of charging VAT will be used. Nor is there a legal right for the customer to know, or be told, how much of the price comprises VAT.
Yet as VAT on the full purchase price is likely to be rather more than VAT on the dealer's profit on the transaction, it seems to me worth asking which method of charging VAT a car dealer uses before deciding to buy..
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billyboggins
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