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Traders buy and sell 2 different types of car, one is VAT qualifying, this is for cars that have been solely used for commercial use or commercial vehicles such as vans. The hammer price at auction includes VAT (except on vans where its plus VAT) and this can be used as 'input' tax if you are VAT registered, you then sell the car with 'output' tax declared paying the difference between the 2 on your VAT return. A margin car has been normally privately owned and the VAT was not reclaimed by the first buyer, therefore the selling price has no element of VAT and therefore no 'input' tax so the trader pays VAT on the profit he makes on the vehicle, this is called a 'margin car' thisdoes not really make any difference unless you are a VAT registered trader, you effectively pay the hammer price as an individual whether the car inclues VAT or not.
Not many people realise that traders pay a lot of VAT, you have to pay VAT on your profits regardless of what you have spent, collecting, refurbishing or repairing the vehicle, the car game is really difficult for the smaller trader these days. Trader Tim out!
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