How to Claim a VAT-Related Payment for Exporting Second-Hand Motor Vehicles in Great Britain

How to Claim a VAT-Related Payment for Exporting Second-Hand Motor Vehicles in Great Britain

Are you looking to export second-hand motor vehicles from Great Britain to the EU for resale? If so, you'll be pleased to know that HM Revenue and Customs (HMRC) has introduced a new scheme for businesses in the automotive trade called the Second-hand motor vehicle payment scheme.

This scheme allows businesses to claim a VAT-related payment on eligible second-hand motor vehicles that they buy in Great Britain and move to Northern Ireland or the EU after 30 April 2023 with the intention of selling them.

This guide will explain what the Second-hand motor vehicle payment scheme is, how to calculate and make a claim, and what documents you'll need to provide.

What is the Second-hand motor vehicle payment scheme?

 The Second-hand motor vehicle payment scheme will be introduced on 1 May 2023, and it will apply to second-hand vehicles registered with the Driver and Vehicle Licensing Agency (DVLA) that have been moved with the intention of being sold in Northern Ireland or the EU. The types of vehicles that are eligible for the scheme include cars, vans, lorries, and motorcycles.

However, any vehicles moved before 1 May 2023 or moved with the intention of being broken up and sold as parts or scrap, or intended to be kept rather than sold, will not be eligible for the scheme. The scheme will replace the second-hand margin scheme for vehicles moved to Northern Ireland from 1 May 2023.

The second-hand motor vehicle scheme produces the same overall outcome as would have been achieved if the vehicles were resold in Great Britain under the margin scheme for second-hand motor vehicles, but the method of achieving the outcome is different.

Second-hand vehicles on which VAT has been charged by the seller at the standard rate are not eligible for the second-hand motor vehicle payment scheme.

How to calculate and make a claim

Exporting second-hand motor vehicles from Great Britain to the European Union (EU) for resale can be a lucrative business. However, if you're not familiar with the tax rules and regulations, you may miss out on an opportunity to claim a VAT-related payment.

For UK VAT-registered businesses, the claim for VAT-related payment should be made via the VAT return as if it were input tax incurred on the relevant supply at the relevant time. This will be done by applying the VAT fraction (sixth) to the total purchase price.

The mechanics for refunds to dealers who are not UK-established are still to be announced. HMRC have indicated that the first claims will be possible after August 2023. We will update our guidance as and when HMRC provide us with updates.

The sale will then attract VAT at 20% on its full value if sold in NI, or at the standard rate applicable if sold in other EU countries.

Here's a step-by-step guide on how to claim a VAT-related payment for exporting second-hand motor vehicles from Great Britain to the EU for resale.

Determine your eligibility

The following categories of businesses can use the second-hand vehicle payment scheme if an eligible vehicle is bought in Great Britain and moved to the EU after 30 April 2023 for resale in the EU or Northern Ireland:

• Businesses that are registered for VAT in the UK and have a business establishment in the UK.
• Businesses that are registered for VAT in the EU and which do not have a UK business establishment and VAT registration number.

For UK VAT registered businesses moving eligible second-hand vehicles to Northern Ireland, you will need be involved in the trade of buying and selling second-hand vehicles or occasionally purchase them for resale.

Obtain the necessary documentation

To claim a VAT-related payment, you need to provide proof that you exported the second-hand motor vehicle from Great Britain. You'll need the following documents:

• The original invoice showing the purchase of the vehicle in Great Britain.
• The export evidence, which could be the original bill of lading, a certificate of shipment, or an airway bill.
• The EU sales invoice showing the sale of the vehicle in the EU country.

Submitting your claim

Once you have all the necessary documentation, you can submit your claim. You must submit your claim within six months of the export date. You can submit your claim online using the HM Revenue and Customs (HMRC) portal.

Wait for processing

 After submitting your claim, you'll need to wait for processing. Processing times may vary depending on the volume of claims and complexity of your claim. You can check the status of your claim online using the HMRC portal.

Receiving payment

If your claim is successful, you'll receive a VAT-related payment to your bank account. The payment will be the VAT paid on the purchase of the second-hand motor vehicle in Great Britain.

Streamline your business and save time with this new scheme designed specifically for the automotive trade. Don't miss out on this opportunity to simplify the export process. Get in touch with our VAT team who can assist you with all the benefits of the Second-hand motor vehicle payment scheme.