The Second-hand Vehicle Payment Scheme
The second-hand motor vehicle payment scheme is a new scheme that is being introduced on the 1st May 2023. It will replace the VAT margin scheme for second-hand vehicles purchased in Great Britain (GB) and moved to Northern Ireland (NI) for resale.
The second-hand motor vehicle payment scheme allows dealers to claim a VAT – related payment on their VAT Return if they are:
• VAT registered in the UK and have a business establishment in the UK
• Buying an eligible second-hand motor vehicle in GB
• Moving that vehicle to NI with the intention to resell it in NI or to the EU
How the payment is calculated
The payment is calculated on the VAT fraction on the value of the second -hand vehicle purchased in GB at the time it is moved to NI. For example you buy an eligible second-hand vehicle in GB for £12,000 the VAT related payment would be £2,000 (12,000 x 1/6).
If the vehicle is moved to NI more than 3 months after the vehicle was purchased, the dealer must revalue the vehicle and then use the lesser of either the purchase price or the value at time of movement to NI.
Once a VAT-related payment has been claimed on a vehicle, the vehicle will then be sold with VAT on the full selling price.
Vehicles that you purchase
Eligible second-hand vehicles that you purchase before the 1st May 2023 can continue to use the margin scheme.
Eligible second-hand vehicles that you purchase on or after the 1st of May 2023 will no longer be able to use the margin scheme. The new second-hand payment scheme can be used for vehicles that meet the scheme’s criteria.
Vehicles that you have in stock
Vehicles on the margin scheme that were purchased before the 1st May 2023 are not eligible for the second-hand vehicle payment scheme, these vehicles can continue to be sold using the Margin Scheme up to the 30th April 2024.
Vehicles on the margin scheme that were purchased before the 1st of May 2023 and are still in stock after the 30th April 2024 need to be sold with VAT on the full selling price. These vehicles are not eligible for either the margin scheme or the second-hand vehicle payment scheme.
Documentation required by HMRC
Dealers who use this scheme are required to keep the following supporting documentation for each VAT related payment:
• All eligible vehicles must be recorded in a stock book
• Evidence that you intend to sell the vehicle, for example advertising it for sale, or it being on your garage forecourt
Evidence that the vehicle was moved from GB to NI to include:
• Mode of transport involved
• Route of movement (for example, the port of exit)
• Date of departure of the vehicle
• Delivery address for the vehicle
Copies of all documents or other records that you produce or receive that contain the following information:
• Travel tickets
• Name of ferry or shipping company and date of sailing or airway number and airport, road consignment (CMR) note, courier despatch paperwork, bill of lading or airwaybill
• Details of any haulier or other courier who makes the movement on your behalf – including invoices they have issued
How to record a VAT related payment claim in DragonDMS
EU Businesses without an establishment in the UK
EU businesses that do not have an establishment in the UK can use this new scheme, the link below details the how these businesses can make a claim.