Business sale

Selling a car is a different story. The easiest way is via a car dealership, they have the experience and know-how to help you with the paperwork. If you are going to sell your business purchase by yourself, you have to know the do's and dont's.

VAT qualifying

First of all, if you have reclaimed VAT on your purchase, you cannot use the margin scheme. So you will have to calculate VAT on the full selling price.

For example

You are selling your company car for £8000, you can advertise it with Gross VAT qualifying.

17,5% VAT on £8000 is (17,5/117,5 x 8000) = £1191

After you paid VAT, you will have £6809.

Margin scheme

You have bought a used car under the margin scheme or did not reclaim the VAT? Then you do not have to calculate VAT over the full selling price. The downside of buying a used car under the margin scheme is not being able to reclaim the VAT over the purchase price. The upside is, that you do not have to pay VAT over the full selling price.

The term margin scheme means that you only pay VAT over the difference between the price you have in the books and the selling price: the margin. If you do not make a profit, you do not pay VAT.

For example

You are selling your company car for £8000 under the margin scheme. This amount includes a profit of £1000.

17,5% VAT on £1000 is (17,5/117,5 x 1000) = £149

After you paid VAT, you will have: 8000 minus 149 = £7851

The total end price is much higher than under the VAT scheme. Keep in mind, however, that you have not reclaimed VAT during the purchase.

Conclusion

Buying a car privately, it is of no importance whether a car is VAT qualifying or not. Are you buying a used car for business use? Then you will want to reclaim the VAT. This will narrow your search to cars previously owned by businesses, e.g. ex lease cars.