VAT on used motor home?

[Ottewill]

Can any one explain how vat is charged on second hand motorhomes Always thought it was calculated as being paid on the profit margin made by dealer. My invoice shows a full 20% being charged. Ie £120,000 advertised price.
invoice showing £100,000 plus £20,000 vat?.previous owner not vat registered, I am private buyer not vat registered.

 

[Abacist]

The invoice is a load of cobblers! VAT should not be shown on secondhand invoices as the customer is not liable for any just the dealer on the margin, as you said.

 

[funflair]

Wouldn't the VAT still show if the van had been traded in by a business ? the next purchaser again if they were also a business could then reclaim VAT.

 

[Abacist]

Wouldn't the VAT still show if the van had been traded in by a business ? the next purchaser again if they were also a business could then reclaim VAT.

The OP said the previous owner was not VAT registered.

 

[DBK]

The dealer is allowed to either charge vat on the profit or charge 20 per cent of the selling price. It's bizarre but legally they can do either. But the latter just inflates the selling price so is rarely used.

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[funflair]

The OP said the previous owner was not VAT registered.

Oops missed that Sorry

 

[Bleau’s]

Think simon is the best person to give the correct answer but I agree with the first post that is how it was when we was a used caravan dealer .

 

[Jim]

I would only be concerned about it if I was claiming the VAT back. As long the VAT, whether at the full 20% or a lesser amount, on the Profit margin Scheme, is included in your sale price NOT ADDED TO IT. What what does it matter? The amount on the invoice is for him and the HMRC to worry about. Your van is still a 120k van, even though the tax was applied

 

[Barryh]

I’m not an accountant or anything but I have run a VAT registered business. My understanding is that you had to issue an invoice/receipt which showed your VAT registration number and the amount of VAT. Either way it costs what costs and it’s not your problem unless you want to reclaim the VAT.

 

[Sue and Rick]

If the seller is charging vat on a proper vat invoice, he will have to pay that to HMRC.
As long as your happy with the 120K price nothing to worry about.
Although why he would charge the full 20% when he doesn’t need to is a mystery.
He’s collecting tax for free and paying more than he needs to.

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[Jim]

Although why he would charge the full 20% when he doesn’t need to is a mystery.

Sometimes it's simpler. Profit Margin Scheme can be complicated with plenty of generated paperwork.

 

[Jim]

Interest peaked and I had a look. Apart from choosing not to, a dealer is not allowed to use the margin scheme under the following circumstances, so one of these might or might not apply.

You cannot use the scheme for:

• new vehicles
• vehicles imported into the UK, including vehicles collected on your behalf
• any vehicle purchased on an invoice which shows VAT separately
• category A and B write-off vehicles, or any vehicle which is subject to the End Of Life Directive
• new means of transport purchased from EU countries into Northern Ireland
• vehicles bought from registered dealers in EU countries supplied to Northern Ireland which have not been supplied under a margin scheme
• vehicles already sold under the normal VAT rules
• vehicles that you bought and reclaimed, or were entitled to reclaim VAT, including:
  • import VAT on vehicles purchased from outside the UK
  • acquisition tax chargeable in Northern Ireland on purchases from dealers in EU countries
• vehicles showing VAT has been charged on the purchase invoice

 

[Trevor Wbm]

I know you've said the previous owner wasn't VAT registered, but it's not clear if you're buying from them or a dealer.

If it's a private individual not registered for VAT, it shouldn't be there.

If it's a VAT registered dealer, you'll be paying VAT. (I believe this would be under the VAT 'Margin' scheme, and that should be 1/6th of the profit the dealer's making, which is 20% (1/5th), added on to the profit margin, not the full paid price).
If the previous owner the dealer bought from was, as is most likely, a private individual, and my contents in brackets are right, you're paying too much VAT as it's based on £100,000.

That said, if as has been suggested, if you're OK with the gross price, it would be a paper exercise to reduce the VAT element and increase the basic cost element to which it is being applied, still adding up to £120K

or

If you want to pursue it, for arguments sake a base price of £90,000 plus £10,000 profit would attract Margin VAT of £2000, so the total price would £112,000, but I doubt the dealer is going to be that open about his margins.

 

[Abacist]

A dealer using the margin scheme is accounting to HMRC for the VAT on the profit or margin in the transaction. This is not available to any customer as input VAT so does not have to be shown on his sales invoice so the dealers margin remains unknown to the purchaser.

Car dealers operate these schemes. When they take a vehicle in they may service it, replace worn parts etc and these are added to the purchase price to determine the margin when it’s sold. Clearly a dealer operating the margin scheme must keep good records to demonstrate how he arrives at his margin vehicle by vehicle.

It’s decades since I did a garage audit but remember over allowances being a legitimate adjustment on trade ins so the true profitability of the used cars could be ascertained and similarly for new cars departments.

 

[Abacist]

Wouldn't the VAT still show if the van had been traded in by a business ? the next purchaser again if they were also a business could then reclaim VAT.

Yes

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[DJT]

I know you've said the previous owner wasn't VAT registered, but it's not clear if you're buying from them or a dealer.

If it's a private individual not registered for VAT, it shouldn't be there.

If it's a VAT registered dealer, you'll be paying VAT. (I believe this would be under the VAT 'Margin' scheme, and that should be 1/6th of the profit the dealer's making, which is 20% (1/5th), added on to the profit margin, not the full paid price).
If the previous owner the dealer bought from was, as is most likely, a private individual, and my contents in brackets are right, you're paying too much VAT as it's based on £100,000.

That said, if as has been suggested, if you're OK with the gross price, it would be a paper exercise to reduce the VAT element and increase the basic cost element to which it is being applied, still adding up to £120K

or

If you want to pursue it, for arguments sake a base price of £90,000 plus £10,000 profit would attract Margin VAT of £2000, so the total price would £112,000, but I doubt the dealer is going to be that open about his margins.

£90,000 +10.000 +2,000 = £102,000 surely!!

 

[Abacist]

I hate to think about the tax consequences of a company owned Motorhome in terms of the benefits in kind tax charges on any staff or directors using it! Fine for a Motorhome rental business though in terms of VAT treatment.

 

[CazPaul]

As long as you were happy with the 120k advertised price and that’s all you paid it wouldn’t matter to me.

 

[BillandHelen]

I hate to think about the tax consequences of a company owned Motorhome in terms of the benefits in kind tax charges on any staff or directors using it! Fine for a Motorhome rental business though in terms of VAT treatment.

Agreed. Jerba Campervans are a “worker owned” company and they provide 2 of their vehicles to employees to holiday in. They also supplied 2 campervans to Richer Sounds who are also employee owned for the same purpose. As you say benefit in kind etc will be a nightmare!

 

[Trevor Wbm]

£90,000 +10.000 +2,000 = £102,000 surely!!

F F S. Yes. Maffs never was my strong suite.