What is a VAT Qualifying car?
Learn all you need to know about VAT qualifying cars. Understand the differences between VAT qualifying and non-VAT qualifying vehicles, including how these terms apply to new and used cars. Discover how to determine if you can save 20% off the purchase price of your car when exporting it from the UK.
Contents
What does VAT qualifying mean? I How is VAT Calculated? I Who can reclaim the VAT on a car? I Should I pay the VAT myself?
What is VAT?
Value Added Tax (VAT) is a tax applied to goods and services by HM Revenue and Customs (HMRC). For cars in the UK, VAT is set at 20% and is included in the advertised price. Under certain conditions, buyers can reclaim the VAT, effectively reducing the car's price by 20%.
What does VAT Qualifying mean?
A car is considered VAT qualifying if it is either brand new or has only been owned by a business for business purposes throughout its lifetime.
The term "gross VAT qualifying" refers to a vehicle that has been registered to a business, meaning the VAT is still reclaimable.
What does non-VAT qualifying mean?
Any car or vehicle that has been privately owned at any point in its lifetime becomes non-VAT qualifying. Once this occurs, the VAT is no longer reclaimable, and the VAT qualifying status cannot be reinstated, regardless of subsequent ownership.
What is a margin car?
A margin car, also known as a VAT margin car, is a vehicle that falls outside the scope of VAT. Essentially, it means the vehicle is not eligible for VAT reclamation. This status arises when VAT was included in a previous transaction involving the vehicle, and once the VAT has been paid, the car permanently loses its VAT qualifying status.
What is a VAT deductable car?
A VAT deductible car means the car is VAT qualifying and eligible for the VAT to be reclaimed.
What does net of vat mean?
The term ‘net of VAT’ means not including VAT. So if you are given a price for a car which says ‘net of VAT’ in the quote, it means that the VAT has been deducted from the price quoted.
What does plus vat mean?
When you are provided with a quote which says ‘plus VAT’ it means that the price provided doesn’t include the 20% UK VAT. Usually this means that the VAT will be added onto the price quoted when you are paying the money.
Save 20% exporting VAT qualifying cars
Buying VAT qualifying cars of export enables overseas customers to save 20 % VAT off the advertised price. This is because we can reclaim VAT from HMRC when a VAT qualifying car is permanently exported from the UK.
To illustrate: a VAT qualifying car advertised at £60,000 will have a buying price of £50,000 as the £10,000 VAT is reclaimable from HMRC upon exporting from the UK.
How is VAT calculated?
20% VAT is added to the car’s price to give it a selling price inclusive of VAT. Cars are almost always advertised with the VAT included in their price. To work out how much saving you will make on a VAT qualifying car, simply divide the advertised price by 1.2.
For example
Advertised price = £60,000 (inc VAT)
Divided by 1.2 = £50,000 (net of VAT)
The VAT is £10,000 (Vat saving if reclaimed)
Who can reclaim the UK VAT on a car?
A UK registered business needs to buy the VAT qualifying car. As the owner of thie VAT qualifying vehicle, the VAT registered business is eligible to reclaim the UK VAT if they are buying it for business reasons. Private individuals are not eligible to reclaim the UK VAT on VAT qualifying cars.
Should I pay the VAT myself?
Professional car exporters will not ask you to cover the VAT for your car. They will sell it to you net of VAT and so you needn’t worry about finding the money and waiting for it to be returned to you. This is a treacherous situation and doesn’t always turn out well, so we would advise against it. We always sell our car net of UK VAT, so you can buy your car with the saving in your price from the outset.
