Brexit, and VAT on second hand cars imported from Great Britain to Northern Ireland

[Cooper]

Used car prices and brexit. This doesn't make pretty reading. I was sent this yesterday, a comment from a VAT consultancy about the potential change to the margin scheme after Brexit, and I've grabbed the relevant section from gov.uk.

I'd like to hear from any traders here and any accountants/VAT accountants on the forum - what is the impact on Joe Average in NI. Will full VAT be applied from GB for a private sale to NI for example? Is this something a dealer will have to sort themselves and we the customer won't see it. Will it drive the costs of used cars NI significantly upward?

Brexit used car VAT surprise for Northern Ireland

Northern Ireland dealers who buy used car stock in mainland Great Britain will not benefit from margin schemes after 1 January 2021, meaning VAT will have to be applied. “This will be a major disincentive to buy used stock in GB” said MHA Macintyre Hudson VAT director Glyn Edwards. Prices will instantly rise 20% compared to stock purchased within Northern Ireland or cross border from the south. “It is a consequence of Brexit which no one has flagged before.”

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Margin Scheme​

In line with EU rules, margin schemes involving goods, such as the second-hand margin schemes, will not usually apply for sales in Northern Ireland where the stock is purchased in Great Britain. The VAT on these sales will be subject to the normal rules and must be accounted for on the full value of the supply.

Margin schemes will remain available for sales of goods that are purchased in Northern Ireland or the EU, whether sold to customers in Northern Ireland, Great Britain or the EU.

Margin schemes will remain available for sellers in Great Britain selling stock originally purchased in Northern Ireland or Great Britain.

Accounting for VAT on goods moving between Great Britain and Northern Ireland from 1 January 2021

www.gov.uk

 

[Rocko]

@Andy888 Stop worrying about the flu for a minute and hit us with some tax expertise.

 

[KevM]

I'm not sure its as bad as it reads. I could be wrong though.

It has possibly been written by one of those "So how do I go about importing the car from NI to the UK once I buy it from you" types.

Time will tell....

 

[Coog]

I'm not sure its as bad as it reads. I could be wrong though.

It has possibly been written by one of those "So how do I go about importing the car from NI to the UK once I buy it from you" types.

Time will tell....

Yeah doesn't seem like a major change to the private buyers market to me. I'm no expert but it appears that the accounting timing is different... but in the end the VAT on the profit margin on that vehicle will be the only VAT payable & therefore passed to the private buyer (as it is today). This is just a longer way to get to the same number due to the way NI will be set-up.

Technically it could impact legitimate driveway traders i.e those under the VAT threshold.

Also 'interesting' that UK VAT could in theory be applied multiple times to the same item

 

[Cooper]

Yeah doesn't seem like a major change to the private buyers market to me. The accounting timing is different but in the end the VAT on the profit margin on that vehicle will be the only VAT payable & therefore passed to the private buyer (as it is today). This is just a longer way to get to the same number due to the way NI will be set-up.

Technically it could impact legitimate driveway traders i.e those under the VAT threshold.

Is it a cashflow hurdle for dealers then? They have to stump up more for the same and wait until something sells to do the margin calculation?

 

[Coog]

Is it a cashflow hurdle for dealers then? They have to stump up more for the same and wait until something sells to do the margin calculation?

Yes that's a possibility. For the first half of 2021 for sure.

 

[Wild Thing]

All cars you would buy second hand privately include vat, it would be cars coming off leases rentals etc that were under the margins scheme that will have vat added but that was the way it always was on cars in gb or northern ireland

 

[richiemucker]

@Jas Lad would be the man to run this past.

 

[NI_Volvo_Nut]

NI is part of the UK, why would the UK need to pay VAT on a car sold in the UK. Probably another of those uneducated types that has confused North and South.

BTW I didn't read the article, I decided it was BS just from the title

To much scare mongering around Brexit and is all it is!

 

[KevM]

“It is a consequence of Brexit which no one has flagged before.”

It hasnt been flagged, as it hasnt been mis-interpreted by anyone else before (hopefully)

We already pay VAT on VAT qualifying cars/commercials and show in the accounts as required, & we pay VAT on the profit. Second hand cars have had the VAT paid already and dont get double-taxed. I dont see any of that changing.

The only thing I can see, is the Margin scheme rate is 16.67%. If thats not available to NI and charged at 20% VAT rate instead, the difference will be minimal. ie 16.67% of say £500 profit, vs 20% of £500 profit. Less than £20 of a increase.

 

[Cooper]

So I'm definitely not a VAT expert, hence why I thought I'd post this up.

The very exciting gov.uk document on VAT:

[Withdrawn] The Margin Scheme on second-hand cars and other vehicles (VAT Notice 718/1)

How the Margin Scheme works and when you can use it for sales of second-hand vehicles.

www.gov.uk

If you sell second-hand vehicles on which you were not charged VAT, using the Margin Scheme will save you money.

Without the Margin Scheme, you would have to account for VAT on the full selling price of each vehicle.

But, if you use the Margin Scheme, you can account for VAT on the difference between the price you pay for a second-hand vehicle and the price you sell it for.

NI loses the margin scheme due to Brexit, so the VAT goes on the full price? (For dealers of course, so this doesn't effect a private sale)

 

[Cooper]

“It is a consequence of Brexit which no one has flagged before.”

It hasnt been flagged, as it hasnt been mis-interpreted by anyone else before (hopefully)

We already pay VAT on VAT qualifying cars/commercials and show in the accounts as required, & we pay VAT on the profit. Second hand cars have had the VAT paid already and dont get double-taxed. I dont see any of that changing.

The only thing I can see, is the Margin scheme rate is 16.67%. If thats not available to NI and charged at 20% VAT rate instead, the difference will be minimal. ie 16.67% of say £500 profit, vs 20% of £500 profit. Less than £20 of a increase.

HMRC only published the guidance last Monday. Jeepers I've gone full Karen Google.

 

[suckindiesel]

Could be a right ball ache this! Prefer they abolished the margin scheme as customers don't seem to account for it when they tell you what you are making on their car

 

[gcon45]

No vat on cash danite lad

 

[Coog]

No vat on cash danite lad

Unless its 'just in from England, motorway miles'...

 

[G N K]

Unless its 'just in from England, motorway miles'...

Just kitted, wheels optional extra.

 

[gcon45]

Just kitted, wheels optional extra.

I boycott ‘wheels optional extra’ ads.

 

[gary1365]

I boycott ‘wheels optional extra’ ads.

Wife's brother paid £3.5k for a 13 year old 1.9pd Leon on BBS ch reps and a straight pipe from a dealer fully ripped off.

 

[Cooper]

Lets keep to topic folks.

 

[steaa]

The author is getting at the fact that HMRC will administer EU vat in regards to goods in NI come January.

 

[gcon45]

Brexit changes set to hit second-hand cars in NI

From January, NI car dealers will have a bigger VAT bill for vehicles bought in GB and sold on here.

www.bbc.com

Looks like a body blow for the second hand dealers. Won’t affect the driveway dealers who don’t pay VAT anyway.
If anything it’ll help them.

 

[Cooper]

Brexit changes set to hit second-hand cars in NI

From January, NI car dealers will have a bigger VAT bill for vehicles bought in GB and sold on here.

www.bbc.co.uk

 

[Modmedia]

Yup this is massive. It was talked about last month in here between all the management teams in here. I don't do the management side of things anymore (thank ****) so I didn't pay too much attention to it when it was mentioned... but seeing this it looks like them worrying about it was justified.

 

[Robert]

“The VAT bill for a car bought for £8,000 and sold for £10,000 could rise from £333 to £1666.”

Surely this cannot be accurate? If it is then it’s bound to leave used car dealers in Northern Ireland in a totally non-viable situation.

 

[Antoin]

“The VAT bill for a car bought for £8,000 and sold for £10,000 could rise from £333 to £1666.”

Surely this cannot be accurate? If it is then it’s bound to leave used car dealers in Northern Ireland in a totally non-viable situation.

They will just wind the clock back another 10k and add the difference to the price