R
ReinholdMessner
I love a good VAT thread 
Firstly, I do agree that non-VAT registered sellers - probably most Autotrader users - won't charge any VAT on any sales of anything, so yes the Margin Scheme is only relevant to dealer sales. However, given that most (all?) the examples changing hands on this thread have involved dealers, I'd forgive myself for not saying this explicitly in my last post.
As a preamble, it's worth being clear on what "ex VAT" means, because it's a common area of confusion. I'm sorry if anyone thinks this is insulting to their own intelligence but a lot of people (including some commercial solicitors who ought to know better) don't get it right:
"Ex VAT" is short for "excluding VAT", which in tax-world means "any VAT chargeable on this sale is due to be paid by the buyer to the seller in addition to the price stated". It doesn't matter who paid/recovered what earlier in the supply chain, the term refers entirely to who bears the cost of any VAT to be accounted for on this sale.
Based on the above paragraph, it's plausible that a VW California could be subject to VAT when sold by Dealer 1 to Driver 1, then not be subject to VAT when sold by Driver 1 to Dealer 2, but then be subject to VAT again (but see below) when sold by Dealer 2 to Driver 3. This thread seems mainly to be concerned with the sale from Dealer 2 to Driver 3, i.e. a second-hand, used, vehicle.
The reason I said we need to consider the Margin Scheme is this:
If I see an advert from a dealer, such as most of the examples above, which says "75k ex VAT" I want to know if the dealer's going to charge me any VAT on top of my 75k. I also want to know how much VAT, particularly if I'm going to be indignant about the final price on the internet. Without knowing if the sale comes into the Margin Scheme I don't know how much VAT, if any, will be charged to me on my purchase. It might be £0 if the dealer bought the same vehicle for <=75k and made no margin. Or if he bought it for 60k, I'd pay VAT on the 15k margin, i.e. 3k of VAT. So in this example, the selling price would be 75k ex VAT, but actually £78k inc VAT.
To make it even better, because the Margin Scheme is optional, the dealer might charge me VAT at 20% on the full 75k, so I'd end up paying £90k in total.
None of this is affected by what tax the first buyer ("Driver 1" in my earlier paragraph) paid, so we can't say "the price probably includes VAT because the first buyer paid it", because there are too many other, more relevant, variables which affect whether any VAT will be charged on top of the quoted price where we're looking at the sale of a second hand vehicle.
Is anyone still reading...
Firstly, I do agree that non-VAT registered sellers - probably most Autotrader users - won't charge any VAT on any sales of anything, so yes the Margin Scheme is only relevant to dealer sales. However, given that most (all?) the examples changing hands on this thread have involved dealers, I'd forgive myself for not saying this explicitly in my last post.
As a preamble, it's worth being clear on what "ex VAT" means, because it's a common area of confusion. I'm sorry if anyone thinks this is insulting to their own intelligence but a lot of people (including some commercial solicitors who ought to know better) don't get it right:
"Ex VAT" is short for "excluding VAT", which in tax-world means "any VAT chargeable on this sale is due to be paid by the buyer to the seller in addition to the price stated". It doesn't matter who paid/recovered what earlier in the supply chain, the term refers entirely to who bears the cost of any VAT to be accounted for on this sale.
Based on the above paragraph, it's plausible that a VW California could be subject to VAT when sold by Dealer 1 to Driver 1, then not be subject to VAT when sold by Driver 1 to Dealer 2, but then be subject to VAT again (but see below) when sold by Dealer 2 to Driver 3. This thread seems mainly to be concerned with the sale from Dealer 2 to Driver 3, i.e. a second-hand, used, vehicle.
The reason I said we need to consider the Margin Scheme is this:
If I see an advert from a dealer, such as most of the examples above, which says "75k ex VAT" I want to know if the dealer's going to charge me any VAT on top of my 75k. I also want to know how much VAT, particularly if I'm going to be indignant about the final price on the internet. Without knowing if the sale comes into the Margin Scheme I don't know how much VAT, if any, will be charged to me on my purchase. It might be £0 if the dealer bought the same vehicle for <=75k and made no margin. Or if he bought it for 60k, I'd pay VAT on the 15k margin, i.e. 3k of VAT. So in this example, the selling price would be 75k ex VAT, but actually £78k inc VAT.
To make it even better, because the Margin Scheme is optional, the dealer might charge me VAT at 20% on the full 75k, so I'd end up paying £90k in total.
None of this is affected by what tax the first buyer ("Driver 1" in my earlier paragraph) paid, so we can't say "the price probably includes VAT because the first buyer paid it", because there are too many other, more relevant, variables which affect whether any VAT will be charged on top of the quoted price where we're looking at the sale of a second hand vehicle.
Is anyone still reading...
