Reclaiming VAT on second hand vehicles
Any commercial vehicles for sale will be advertised as "+VAT". Obviously a VAT registered business can reclaim the VAT on a commercial vehicle. The rules around VAT on commercial vehicles are well understood, so I wont expand any further here.
However, I often sell used cars that are 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 lease company or haven't left the motor trade since new.
As a general rule, VAT is not reclaimable on cars. 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.