ICAEW.com works better with JavaScript enabled.

TAX NEWS

Extension of VAT second-hand margin scheme in NI

Article

Published: 01 Nov 2023 Update History

Eligible vehicles purchased in Great Britain and moved to Northern Ireland before 1 May 2023 can now be sold under the margin scheme until 30 April 2024.

Until 1 May 2023, businesses could account for VAT on second-hand vehicles bought in Great Britain and sold in Northern Ireland under the second-hand margin scheme. This meant the business was only required to account for VAT on the difference between the purchase price and the sale price. Vehicles purchased in Great Britain from 1 May 2023 onwards but sold in Northern Ireland no longer qualify for the margin scheme.

Transitional arrangements are in place for vehicles purchased in Great Britain and moved to Northern Ireland before 1 May 2023. Following an extension from HMRC, these vehicles remain eligible for the margin scheme until 30 April 2024, instead of 31 October 2023.

From 1 May 2024, the transitional arrangements will no longer apply. VAT will have to be accounted for on the full selling price of any vehicle moved from Great Britain and sold in Northern Ireland, regardless of when it moved.

Second-hand motor vehicle payment scheme

To compensate businesses that can no longer use the second-hand margin scheme, HMRC has introduced a second-hand motor vehicle payment scheme. The scheme allows 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 is to resell the vehicle once the vehicle is moved to Northern Ireland. 

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 1/6 – to the value of the vehicle, which will usually be the full purchase price paid. 

Further reading:

The Tax Faculty

ICAEW's Tax Faculty is recognised internationally as a leading authority and source of expertise on taxation. The faculty is the voice of tax for ICAEW, responsible for all submissions to the tax authorities. Join the Faculty for expert guidance and support enabling you to provide the best advice on tax to your clients or business.

More support on tax

ICAEW's Tax Faculty provides technical guidance and practical support on tax practice and policy. You can sign up to the Tax Faculty's free enewsletter (TAXwire) which provides weekly updates on developments in tax.

Sign up for TAXwireJoin the Tax Faculty

More from the Tax Faculty

Latest news
Making tax digital image
TAXwire

Stay up to date with the latest developments in tax by signing up to the Tax Faculty's weekly e-newsletter

Practical guidance
Cover
TAXline

Comprehensive support for Tax practitioners each month from the Tax Faculty and expert contributors.

Technical support
Tax Faculty image
Webinars

Expert advice from the Tax Faculty's technical managers on all the developments in tax policy and practice.