Means of transport are named outright. And still this is the type that causes the most arguments — because of one rule that redefines the word “new”.
Used cars fall under the margin scheme, with a catch in the word “new”.
Second-hand cars fall under the margin scheme. In the UK they have a scheme of their own, and imported cars, category A and B write-offs and cars bought with VAT are shut out of it.
In the UK, cars sit apart. Article 2 of the Value Added Tax (Special Provisions) Order 1995 takes motor cars out of second-hand goods, and article 8 of the Value Added Tax (Cars) Order 1992 gives used motor cars a margin scheme of their own; section 50A(2) of the VAT Act 1994 names motor vehicles separately. Belgium’s FPS Finance likewise names second-hand means of transport separately in its scheme. The short answer, country by country.
What sets the car trade apart is the list of cars the scheme will not take. gov.uk names them one by one — and for sales between EU countries, a car can even count as new for VAT after it has been driven.
A car bought from a private individual, from a leasing company without a right to deduct, or from a colleague working under the margin carries no deductible VAT. That is exactly what the scheme is for.
Buy from a garage with VAT on the invoice and it is an ordinary purchase with deduction. The same car, a different route — and that route is fixed at purchase, not at sale.
Article 2 of the Value Added Tax (Special Provisions) Order 1995 defines second-hand goods as “tangible movable property that is suitable for further use as it is or after repair, other than motor cars, works of art, collectors’ items or antiques and other than precious metals and precious stones”. Article 12(2) opens the margin scheme to “works of art, antiques and collectors’ items” and “second-hand goods”.
That is the whole test, and it is a test about the goods, not about your trade. The power to charge VAT on the profit margin sits in section 50A of the VAT Act 1994, which also names motor vehicles separately. Article 12(3) of the 1995 Order adds the purchase side: you must have taken possession of the goods on a supply on which no VAT was chargeable, or on another margin-scheme sale. gov.uk (VAT margin schemes) puts it plainly: you cannot use a margin scheme for “any item you bought for which you were charged VAT”. Belgium, which follows the EU VAT Directive, keeps its own exclusion list: FPS Finance names new goods, precious metals, precious stones and pearls, renovated goods, goods consumed on first use and goods that cannot be used again in the same state, under article 58, § 4 of the Belgian VAT Code and Royal Decree no. 53 of 23 December 1994. The four-country panel below shows where that changes the answer.
The example is a classic car: bought for €6,500.00, sold for €9,200.00. Put your own figures in.
Sold at a loss: no margin on this item, so no VAT. In the UK you work item by item: the loss counts as zero and gives you nothing back.
The VAT is inside the margin, not on top of it. That is the mistake this calculator is built to prevent: 20% on this example’s margin of 2,700 is 540.00, while in the UK you owe one-sixth, 450.00 — the 16.67% gov.uk quotes. At Belgium’s 21%, the same mistake turns €468.60 into €567.00. How to do this across a whole return period — and why France calculates piece by piece by law — is set out in How do you calculate margin VAT?
In the UK, gov.uk (Using the VAT margin scheme for second-hand vehicles) excludes new vehicles, vehicles imported into the UK, any vehicle bought on an invoice that shows VAT separately, category A and B write-offs and vehicles subject to the End of Life Directive. A car you rebuild stays eligible only if you built it from used vehicles bought under the scheme and it does not need re-registering with the DVLA; with a new registration number, VAT is due on the full price. Cars are also shut out of global accounting (article 13(2) of the 1995 Order).
Within the EU there is a further crossing, the rule on new means of transport: under article 2(2) of the EU VAT Directive 2006/112/EC, a motorised land vehicle of more than 48 cc or 7.2 kW counts as new if it is supplied within six months of first entry into service or has travelled no more than 6,000 kilometres, whatever the advert says. Such a supply is exempt in the member state where the transport starts, and VAT is due in the buyer’s member state (Directive 2006/112/EC, articles 138(2)(a) and 2(1)(b)(ii)) — a very different route than the margin. Belgium also excludes goods out of use and goods converted so heavily that they can no longer be identified as the same goods.
In the UK, whether used cars fall under the scheme is a matter of UK law: HMRC runs its own margin schemes under section 50A of the VAT Act 1994. Belgium, the Netherlands and France all follow the same EU VAT Directive (2006/112/EC). Each country interprets the rules itself; where that makes a difference for used cars, this page says so. The rate and the calculation method always differ.
Margin across the whole return period. Article 58, § 4 VAT Code and RD no. 53.
Per period by default (global accounting, Uitvoeringsbesluit OB 1968, art. 4c(1)). You can opt out in writing to the inspector, for at least five years.
Legally piece by piece, but globalisation per period is allowed, with no prior election. CGI art. 297 A; BOFiP § 260.
HMRC’s own scheme, outside the EU. Below the registration threshold you pay nothing.
Within six months of first entry into service or up to 6,000 kilometres, a car counts as new on a supply to a buyer in another member state: exempt in the seller’s member state, taxed in the buyer’s (Directive 2006/112/EC, articles 2(2), 138(2)(a)).
The margin is selling price minus purchase price. A new timing belt does not lower your margin, only your profit.
If your supplier charged you VAT, the car is not margin goods, whether or not you deducted it. The choice is made at purchase, not afterwards.
A margin invoice carries no VAT amount. On amounts of thousands of euros that is not a detail.
This is an explanation, not tax advice. Whether the margin scheme is the right choice in your case, and how to enter it in your return, is a question for your accountant.
Yes. In the UK, article 8 of the Value Added Tax (Cars) Order 1992 lets you account for VAT on the margin of a used motor car you took possession of on a supply on which no VAT was chargeable, or on another margin-scheme sale. Other second-hand vehicles, such as commercial vehicles, fall under the general scheme (HMRC, VATMARG02100). Belgium’s FPS Finance also names second-hand means of transport among the goods its scheme applies to.
No. Article 8(2) of the Cars Order requires that you took possession of the car on a supply on which no VAT was chargeable, or on another margin-scheme sale, and gov.uk excludes any vehicle purchased on an invoice which shows VAT separately. If your seller charged you VAT, you sell with ordinary VAT on the full price.
No. gov.uk says the purchase price does not include the cost of bringing the vehicle to sale, repairs, refurbishment or accessories. What the buyer pays you for, such as an MOT you had done to make the car saleable, does count in the selling price.
In the UK, at 20%, the VAT is one-sixth of the margin: €2,700 ÷ 6 = €450.00 (in pounds the sum works the same way). In Belgium, at 21%, €468.60 (€2,700 × 21/121). Charge 21% on top of that margin and you land on €567 — almost a hundred euros too much on a single car.
The same question, a different kind of piece. The answer differs more often than you would expect.
Every piece gets its own purchase price, selling price and scheme. Vintro Pro keeps margin goods separate from the rest and works out your margin per return period.
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