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Commercial Vehicle & VAT

Charge VAT or NOT

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A VAT registered car repair shop is selling his business Land Rover. It was purchased 3 years ago for the business and no VAT was paid as it was a private seller. It is due to be sold and he insists that VAT doesn't need to be charged. Right or wrong ?

Replies (26)

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RLI
By lionofludesch
20th Mar 2018 17:27

There's not enough information to say more than .....

Maybe - he can use a second hand margin scheme.

What did he buy it for and what did he sell it for ?

Is it a commercial vehicle (may well be) or is it a car he uses for business ?

And is the purchaser VAT registered ?

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Replying to lionofludesch:
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By Yorkshire Blue
20th Mar 2018 17:51

He paid £8k and is selling for £8k plus(possibly) VAT - it is a commercial vehicle and it is a potential private buyer so not VAT registered.

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Replying to Yorkshire Blue:
RLI
By lionofludesch
20th Mar 2018 18:05

Margin scheme - just pay the VAT on £8k - £8k = £0.

If the buyer was registered, I'd charge VAT if he could reclaim it. It wouldn't make any difference in the instant case but it could do in some cases, depending on the circs. Generally, if you buy the vehicle from, or sell it to, someone registered, you're better off not using the margin scheme but selling it for the same price as you paid is a bit of a special case.

Thanks (3)
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By Adam12345
20th Mar 2018 18:16

Exempt supply under VATA 1994 Sch 9 Group 14 maybe?

The problem with the margin scheme is that one of the requirements in VAT Notice 718 Para 2.3 is that 'you obtained the goods for resale'. It sounds to me that the Land Rover was a fixed asset rather than stock, but as lion has said, we are trying to fill in the missing gaps.

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Replying to Adam12345:
By Ruddles
20th Mar 2018 19:21

Might para 10.12 apply?

Probably - it pays to read the legislation.

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Replying to Adam12345:
RLI
By lionofludesch
20th Mar 2018 18:44

Adam12345 wrote:

Exempt supply under VATA 1994 Sch 9 Group 14 maybe?

The problem with the margin scheme is that one of the requirements in VAT Notice 718 Para 2.3 is that 'you obtained the goods for resale'. It sounds to me that the Land Rover was a fixed asset rather than stock, but as lion has said, we are trying to fill in the missing gaps.

I'm looking at

https://www.gov.uk/vat-margin-schemes/keeping-records

What are you looking at ?

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Replying to lionofludesch:
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By Yorkshire Blue
20th Mar 2018 19:04

It was bought as a fixed asset rather than for resale - small breakdowns, recoveries etc. Money has been spent on the vehicle in repairs etc., hence the selling price being the same as the initial purchase price. It is a workshop and not a vehicle selling garage.

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Replying to Yorkshire Blue:
RLI
By lionofludesch
21st Mar 2018 08:06

Yorkshire Blue wrote:

It was bought as a fixed asset rather than for resale - small breakdowns, recoveries etc. Money has been spent on the vehicle in repairs etc., hence the selling price being the same as the initial purchase price. It is a workshop and not a vehicle selling garage.

So ?

What's your point ?

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Replying to lionofludesch:
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By Yorkshire Blue
21st Mar 2018 08:50

Just clarification that the initial purchase wasn't for re-sale and the implication for the margin scheme.

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Replying to lionofludesch:
RLI
By lionofludesch
21st Mar 2018 18:02

lionofludesch wrote:

Adam12345 wrote:

Exempt supply under VATA 1994 Sch 9 Group 14 maybe?

The problem with the margin scheme is that one of the requirements in VAT Notice 718 Para 2.3 is that 'you obtained the goods for resale'. It sounds to me that the Land Rover was a fixed asset rather than stock, but as lion has said, we are trying to fill in the missing gaps.

I'm looking at

https://www.gov.uk/vat-margin-schemes/keeping-records

What are you looking at ?

In the link I quoted above, can anyone tell me where it says anything about buying this asset for resale ?

Ruddles and Portia - no need for you to answer.

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Replying to Adam12345:
By Ruddles
20th Mar 2018 19:11

Adam12345 wrote:
Exempt supply under VATA 1994 Sch 9 Group 14 maybe?

No
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By pawncob
20th Mar 2018 21:37

He's no different from any other business. Sell it for £8k plus VAT, or £8k and declare the VAT content.
If it qualifies as a car, then no VAT involved.

Thanks (1)
Replying to pawncob:
By Ruddles
20th Mar 2018 22:11

pawncob wrote:
Sell it for £8k plus VAT, or £8k and declare the VAT content.

Or sell it for £8k and account for VAT on the margin, ie £0
Thanks (1)
Replying to Ruddles:
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By 356B
21st Mar 2018 10:20

He can't meet the criteria for the margin scheme, so he can't use it.
If it's commercial, then like any other business he'll have to charge VAT on the sale. (that is on the whole of the selling price and account for that VAT)

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Replying to pawncob:
RLI
By lionofludesch
21st Mar 2018 08:09

pawncob wrote:

He's no different from any other business.

No, he isn't. So why do you want him to pay the VAT ?

Thanks (1)
Portia profile image
By Portia Nina Levin
21st Mar 2018 10:34

The problem here, is that only Ruddles and lionofludesch are correctly referring to VAT Notice 718/1.

Everybody else is incorrectly referring to VAT Notice 718.

As Ruddles notes, it qualifies for margin scheme treatment, and does not fall within the exemption (that applies for example when on the sale of a car where VAT was charged on the full price, but was irrecoverable).

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Replying to Portia Nina Levin:
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By 356B
21st Mar 2018 10:59

It fails to qualify for the margin scheme on record keeping.
It fails to qualify for the margin scheme because it wasn't bought for resale.

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Replying to 356B:
Portia profile image
By Portia Nina Levin
21st Mar 2018 11:11

It doesn't need to have been bought for resale. Read the correct notice.

How do we know that the client does not have the necessary information to deal with record-keeping.

Thanks (3)
Replying to Portia Nina Levin:
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By 356B
21st Mar 2018 11:58

Quote:
•you must have acquired the vehicles in eligible circumstances. In most cases, this means that you have obtained eligible vehicles for resale in circumstances where VAT was not chargeable (see paragraph 2.4

This is only "in most cases", so why is this one exceptional?

We know he doesn't have the correct records because if he had bought it with the intention of using the margin scheme he wouldn't be asking the question now.

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Replying to 356B:
Portia profile image
By Portia Nina Levin
21st Mar 2018 12:14

Para 2.4 "you can use the margin scheme for vehicles you bought from private individuals."

Para 10.12 "if you are not in business to buy and sell second-hand vehicles, but you very occasionally find yourself with an eligible one to sell, and you would like to use the margin scheme for the sale, YOU NEED NOT COMPLY WITH THE FULL RECORD KEEPING REQUIREMENTS, provided you: meet the other conditions of the scheme, and hold evidence of both the purchase and the sale.

Seriously, how frigging hard is this?

Thanks (4)
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By pawncob
21st Mar 2018 14:31

He still hasn't decided if it's commercial.
As far as the Land Rover Defender is concerned, the 2 seat hard top or pickup models are classed as commercials, and the station wagon is classed as a passenger vehicle.

This is further complicated on the long wheel base Defender (110) model where you can purchase a 'Utility Pack' for your station wagon which reclassifies the vehicle as a commercial, deletes the side windows and removes the rear step. However this isn't an option on the SWB.

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Replying to pawncob:
By Ruddles
21st Mar 2018 19:27

pawncob wrote:
He still hasn't decided if it's commercial.

Have a look at the second comment on this thread.
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Replying to Ruddles:
RLI
By lionofludesch
21st Mar 2018 22:10

Does it matter ?

No.

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Replying to lionofludesch:
By Ruddles
21st Mar 2018 22:26

In this case, no - but I’m always happy to tell people when they’re wrong. Who knows what (other) relevant comments they may have missed?

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Replying to Ruddles:
RLI
By lionofludesch
22nd Mar 2018 09:47

Well, there is that. My brother, who is a Sheffield Wednesday supporter, sent me a his calculation of our dad's unused NRB calculation last week, including some RPI adjustment. I told him that you don't need the RPI, you just scale it up in the ratio of what NRB was to what it is now.

"No, no," he says. "The RPI is definitely in there somewhere."

I politely pointed out that I wasn't inviting opinions on the matter, just telling him what the deal is.

But - there you have it. Everyone's an expert. At 11 this morning, I've got a guy coming to explain to me why he decided to buy three shareholdings from connected persons, possibly landing himself with a CGT liability that no-one would have had if he'd left it alone.

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Replying to Ruddles:
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By 356B
22nd Mar 2018 11:27

Just wondered if the OP was aware of the different classes of Landy.

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