From 1 November 2023, businesses will have to account for VAT on the full selling price of all vehicles bought in Great Britain and sold in Northern Ireland.
Until 1 May 2023, businesses could account for VAT on second-hand vehicles bought in Great Britain and sold in Northern Ireland under the second-hand margin scheme. This meant the business was only required to account for VAT on the difference between the purchase price and the sale price.
From 1 May 2023, second-hand vehicles purchased in Great Britain but sold in Northern Ireland no longer qualify for the margin scheme. Instead, output VAT should be charged on the full selling price of the vehicle.
Transitional arrangements are in place for vehicles purchased in Great Britain and moved to Northern Ireland before 1 May 2023. These vehicles remain eligible for the margin scheme until 31 October 2023.
From 1 November 2023, the transitional arrangements will no longer apply. VAT will have to be accounted for on the full selling price of any vehicle moved from Great Britain and sold in Northern Ireland, regardless of when it moved to Northern Ireland.
Second-hand motor vehicle payment scheme
To compensate businesses that can no longer use the second-hand margin scheme, HMRC has introduced a second-hand motor vehicle payment scheme. The scheme 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 motor vehicle in Great Britain; and
- move that vehicle with the intention to resell it in Northern Ireland or to the EU.
Businesses can use the scheme to claim a VAT-related payment for any eligible second-hand motor vehicle bought in Great Britain and moved to Northern Ireland for resale. The scheme can only be used if the business’s first intention is to resell the vehicle once the vehicle is moved to Northern Ireland.
To take advantage of the scheme, businesses should include the payment amount as input tax on their UK VAT return. The payment amount is calculated by applying the VAT fraction – currently 1/6 – to the value of the vehicle, which will usually be the full purchase price paid.
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