VAT-registered businesses buying second-hand vehicles in Great Britain and selling them in Northern Ireland can currently benefit from the second-hand margin scheme, subject to its rules. This means the business is only required to account for VAT on the difference between the purchase price and the sale price.
From 1 May 2023, second-hand vehicles purchased in Great Britain but sold in Northern Ireland will no longer qualify for the margin scheme. Instead, output VAT should be charged on the full selling price.
To compensate businesses, HMRC is introducing a second-hand motor vehicle payment scheme. The scheme will allow businesses to claim a VAT-related payment if they:
- are VAT-registered in the UK and have a business establishment in the UK;
- buy an eligible second-hand motor vehicle in Great Britain; and
- move that vehicle with the intention to resell it in Northern Ireland or to the EU.
Businesses can use the scheme to claim a VAT-related payment for any eligible second-hand motor vehicle bought in Great Britain and moved to Northern Ireland for resale. The scheme can only be used if the business’s first intention, once the vehicle is moved to Northern Ireland, is to resell it.
To take advantage of the scheme, businesses should include the payment amount as input tax on their UK VAT return. The payment amount is calculated by applying the VAT fraction – currently 1/6th – to the value of the vehicle, which will usually be the full purchase price paid.
Businesses can make use of the margin scheme for any eligible motor vehicles purchased in Great Britain and moved to Northern Ireland before 1 May 2023. If these vehicles are still in stock on 1 May 2023, they must be sold by 31 October 2023 to remain eligible for the margin scheme.
VAT will have to be accounted for on the full selling price of any vehicle moved from Great Britain and sold in Northern Ireland on or after 1 November 2023.
Movement of own goods
The changes outlined above do not affect the VAT accounting on the movement of a business’s own goods from Great Britain to Northern Ireland.
When a VAT-registered business moves its own goods from Great Britain to Northern Ireland, it will need to account for VAT on the movement. The business should account for this by including it as output VAT on its VAT return. Where the goods are being used for taxable sales, the VAT may also be reclaimed as input VAT on the same VAT return, subject to the normal rules.
The second-hand motor vehicle payment scheme also allows businesses that are VAT-registered in the EU to claim a VAT-related payment for second-hand vehicles bought in Great Britain and moved to the EU for resale.
Businesses registered in both the UK and the EU with a business establishment in the UK must make the claim on their UK VAT return. There will be a different process to claim the VAT-related payment for those businesses with no establishment in the UK. Further guidance on this will be published in due course.
- Claim a VAT-related payment if you buy second-hand motor vehicles in Great Britain and move them to Northern Ireland for resale
- Claim a VAT-related payment if you buy second-hand motor vehicles in Great Britain and export them to the EU for resale
- Check which motor vehicles are eligible for the second-hand motor vehicle payment scheme
- How to work out the value of a vehicle for the second-hand motor vehicle payment scheme
- Check which records to keep for second-hand vehicles you move to Northern Ireland for resale
- Check which records to keep for second-hand vehicles you export to the EU for resale
- The Value Added Tax (margin schemes and removal or export of goods: VAT-related payments) order 2022
- The Value Added Tax (Margin Schemes and Removal or Export of Goods: VAT-related Payments) Order 2023
- The Finance Act 2022, Section 71 (Margin Schemes and Removal or Export of Goods: Zero-rating) (Appointed Day and Transitional Provision) Regulations 2023
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