VAT explained

Why are vans advertised as plus VAT?

Most vans for sale are advertised as 'plus VAT' as commercial vehicles are generally owned by businesses who are VAT registered and therefore reclaim the VAT. The majority of vans that we sell are one owner vehicles and come from lease companies. Therefore, they are still VAT qualifying vehicles and the VAT has to be charged on the selling price, just like it does when new.

It is only when the van is owned by someone who isn't VAT registered, it is then no longer a VAT qualifying vehicle. This is because that owner has therefore paid the VAT due on the vehicle when they purchased it. From this point onwards, the van is excluded from VAT every time it is sold, just like other second hand vehicles.

I'm not VAT registered, so do I have to pay the VAT?

Yes you do. Everyone has to pay VAT. But a VAT registered business can then reclaim the VAT on their purchases.

Until a vehicle is owned by a private individual or a small business that isn't VAT registered, the state has never had the VAT on that vehicle since it was new. So you end up being the first person to pay over that tax and then from this point onwards, the vehicle is no longer a VAT qualified vehicle.

Can my business reclaim VAT on second hand cars?

VAT on cars is slightly different to vans and commercial vehicles. Used cars we sell are often advertised as "VAT qualifying". This means that the advertised price also includes VAT and the customer will receive an invoice with VAT itemised. Typically, these vehicles arise when they have been owned by a finance company or haven't left the motor trade since new.

As a general rule, VAT is not reclaimable on cars as there is nearly always personal use involved. However, VAT is reclaimable if the car is used solely for business purposes. This is what is classed as an 'excepted car'. Examples where a VAT can be reclaimed are:

• a car that is used exclusively for the purpose of the business and not available for private use, such as a pool car or delivery vehicle.

• a car that intended to be used primarily (i.e. greater than 50%) as a taxi, driving instructors car or as self-drive rental car.

On VAT qualifying cars, same rules apply on used cars as they do on new cars. For more information, refer to https://www.gov.uk/reclaim-vat/cars.

All other used vehicles for sale are on the VAT margin scheme and even if purchased by a business, there is no VAT reclaimable.

This information is indented only as a guide and obviously you should gain advice from your accountant or HMRC.