HMRC intends to introduce the new scheme – second hand motor vehicle export scheme on 1 October 2022.
The purpose of the scheme is to help NI second hand car dealers that have ‘taken a hit’ financially since Brexit because the NI Protocol meant that they were unable to use the margin scheme on vehicles brought in GB.
What is changing?
Although the full details of the scheme haven’t yet been released, HMRC guidance says that NI motor dealers who buy second hand vehicles from GB, NI or the EU can continue to use the VAT second hand margin scheme, accounting for VAT on the margin, that being the difference between the purchase price and the sale price.
If a motor dealer buys a motor vehicle in GB and subsequently transfers it to their dealership prior to selling it, the motor dealer would need to account for VAT on the movement of the vehicle. This means accounting for import VAT on arrival into NI. Provided the vehicle is a stock vehicle, the import VAT can be reclaimed as input VAT on the VAT return. Once the scheme is introduced, NI motor dealers buying stock in GB and transferring it to NI before being sold will no longer be able to use the second-hand margin scheme on such sales. When such vehicles are sold in NI, the dealership will account for VAT on the full value of the supply.
Accounting for VAT correctly
NI dealerships will treat the refund amount as if it were input tax and this will be reclaimed on the UK VAT return. The amount of the refund will be the VAT element of the purchase price at the time that the vehicle is moved to NI.
For example, if a dealership purchase an eligible second-hand car in Great Britain for £12,000 the refund amount would be £2,000 (£12,000 × one-sixth). When the vehicle is sold in Northern Ireland, you must account for VAT at the full value of the supply.
More information to follow
HMRC guidance suggests that more detailed guidance will be released in May 2022. This should include some rules regarding the transaction to the new scheme. In the meantime, dealerships are advised to continue as normal.
The next steps
For more information, please contact Michelle Dale or your usual UHY adviser.
