ICAEW.com works better with JavaScript enabled.

TAX NEWS

VAT rules change for second-hand vehicles bought in Great Britain and sold in Northern Ireland

Article

Published: 31 Jan 2023 Update History

From 1 May 2023, businesses will no longer be able to use a margin scheme when buying second-hand vehicles in Great Britain and selling them in Northern Ireland.
Further update

The transitional arrangements have been extended by six months to 30 April 2024

VAT-registered businesses buying second-hand vehicles in Great Britain and selling them in Northern Ireland can currently benefit from the second-hand margin scheme, subject to its rules. This means the business is 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 will no longer qualify for the margin scheme. Instead, output VAT should be charged on the full selling price.

To compensate businesses, HMRC is introducing a second-hand motor vehicle payment scheme. The scheme will allow 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, once the vehicle is moved to Northern Ireland, is to resell it.

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 1/6th – to the value of the vehicle, which will usually be the full purchase price paid.

Transitional arrangements

Businesses can make use of the margin scheme for any eligible motor vehicles purchased in Great Britain and moved to Northern Ireland before 1 May 2023. If these vehicles are still in stock on 1 May 2023, they must be sold by 31 October 2023 to remain eligible for the margin scheme.

VAT will have to be accounted for on the full selling price of any vehicle moved from Great Britain and sold in Northern Ireland on or after 1 November 2023.

Movement of own goods

The changes outlined above do not affect the VAT accounting on the movement of a business’s own goods from Great Britain to Northern Ireland. 

When a VAT-registered business moves its own goods from Great Britain to Northern Ireland, it will need to account for VAT on the movement. The business should account for this by including it as output VAT on its VAT return. Where the goods are being used for taxable sales, the VAT may also be reclaimed as input VAT on the same VAT return, subject to the normal rules. 

EU businesses

The second-hand motor vehicle payment scheme also allows businesses that are VAT-registered in the EU to claim a VAT-related payment for second-hand vehicles bought in Great Britain and moved to the EU for resale.

Businesses registered in both the UK and the EU with a business establishment in the UK must make the claim on their UK VAT return. There will be a different process to claim the VAT-related payment for those businesses with no establishment in the UK. Further guidance on this will be published in due course.

Further reading:

 

The Tax Faculty

ICAEW's Tax Faculty is recognised internationally as a leading authority and source of expertise on taxation. The faculty is the voice of tax for ICAEW, responsible for all submissions to the tax authorities. Join the Faculty for expert guidance and support enabling you to provide the best advice on tax to your clients or business.

More support on tax

ICAEW's Tax Faculty provides technical guidance and practical support on tax practice and policy. You can sign up to the Tax Faculty's free enewsletter (TAXwire) which provides weekly updates on developments in tax.

Sign up for TAXwireJoin the Tax Faculty

More from the Tax Faculty

Latest news
Making tax digital image
TAXwire

Stay up to date with the latest developments in tax by signing up to the Tax Faculty's weekly e-newsletter

Practical guidance
Cover
TAXline

Comprehensive support for Tax practitioners each month from the Tax Faculty and expert contributors.

Technical support
Tax Faculty image
Webinars

Expert advice from the Tax Faculty's technical managers on all the developments in tax policy and practice.

Open AddCPD icon

Add Verified CPD Activity

Introducing AddCPD, a new way to record your CPD activities!

Log in to start using the AddCPD tool. Available only to ICAEW members.

Add this page to your CPD activity

Step 1 of 3
Download recorded
Download not recorded

Please download the related document if you wish to add this activity to your record

What time are you claiming for this activity?
Mandatory fields

Add this page to your CPD activity

Step 2 of 3
Mandatory field

Add activity to my record

Step 3 of 3
Mandatory field

Activity added

An error has occurred
Please try again

If the problem persists please contact our helpline on +44 (0)1908 248 250