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How does it work? Obviously a main dealer will need to be registered for VAT, but if I was to buy a car for £16k, what would the VAT be on it (if any)? I assume it isn't 20% on the purchase price.
The dealer pays vat on the profit.
If you are buying a used car in a private sale, there is no VAT to pay. If you are buying a used car from a dealer, then he or she will need to pay VAT on any profit made. This is known as the second-hand margin scheme. However, the amount of VAT will not be itemised on the invoice and is of no concern to the buyer.
https://www.cargurus.co.uk/Cars/articles/can_i_reclaim_vat_when_buying_a_car
the only thing to watch out for is commercial vehicles are often priced without VAT, especially if the previous owner was a business
Sorry, I wasn't clear, I am self-employed and I would be purchasing the car through my VAT registered business.
I don't think it makes any difference.
Presumably if the OP buys a commercial vehicle through his business he can reclaim the VAT?
I think this explains the popularity of pick-up trucks.
You should be able to claim the profit vat back if you can get a vat receipt. But the dealer will not want you to know what that profit is.
There's a couple of things to think about.
It's possible to buy a VAT qualifying used car. Ex demonstrators or cars owned by leasing or hire companies can be VAT qualifying. The purchase price might be £12,000, your invoice will actually show £10,000 + £2,000 VAT.
Margin rated cars are explained above - previous owner wasn't able to claim the VAT back so the dealer pays VAT on their profit.
It's all irrelevant anyway as unless you're a taxi firm, a leasing company or a hire company then you can't claim the VAT back on a car even if you're VAT registered. You want a nice van for that.
It’s all irrelevant anyway as unless you’re a taxi firm, a leasing company or a hire company then you can’t claim the VAT back on a car even if you’re VAT registered. You want a nice van for that.
I can claim the VAT back on my lease car (well 50% of it as that's what the regs say)?
can claim the VAT back on my lease car (well 50% of it as that’s what the regs say)?
That's why businesses largely rent their cars so they can reduce their vat bill.
Which they can't do with a sensible used car.
bear-uk
MemberYou should be able to claim the profit vat back if you can get a vat receipt. But the dealer will not want you to know what that profit is.
The dealer pays VAT on the margin, but the car isn’t VAT qualifying and there won’t be VAT on the invoice that you can reclaim on input.