VAT margin scheme for car dealers

Newsletter issue – June 2023

Brexit has introduced a VAT border between Great Britain and Northern Ireland, the implications of which are still being worked through.

From 1 May 2023, second-hand vehicles which are purchased in Great Britain then sold in Northern Ireland have to carry VAT on the full selling price. Before this date motor traders could use the second-hand margin scheme under which VAT is charged only on the margin of sales value added by the dealer.

To compensate these dealers, HMRC has introduced a second-hand motor vehicle payment scheme, which 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 vehicle in Great Britain; and
move that vehicle with the intention to resell it in Northern Ireland or to the EU.

Traders can make use of the margin scheme for any eligible motor vehicles purchased in Great Britain and moved to Northern Ireland before 1 May 2023. If these vehicles are still in stock on 1 May 2023, they must be sold by 31 October 2023 to remain eligible for the margin scheme.