I note from some car auction companies lists of vehicles for auction it states VAT marginal, I cannot find any explaination on their website of what this statement means, can anyone explain ?
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It means that the trader that buys the car at auction has to pay VAT on his margin when he sells the car.The other type is VAT qualifying,and the trader pays VAT on the sale price.
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Simple really:
You buy a car from auction for £5500. In the case of a "margin" car the invoice will state:
Car AB06 CDE: £5500
With a qualifying car it will read:
Car AB06 CDE: 4679.69
VAT: 820.31
Total: 5500
If you are not VAT registered it makes no difference. If you are a car dealer you could reclaim the VAT and then charge it again when you sell it. If you are buying for business use only you could reclaim it whoever you are.
For a car delear it makes no net difference whether a car is margin or not (the same amount gets paid in the end) although if a margin car is bought in one VAT peroid and sold in the next it can be advantagous with cashflow to claim it back.
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Many thanks for your help
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what determines whether a sale is vat qualifying or vat marginal? Does the fact it is VAT marginal tell you anything about the car or it's history?
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My understanding is, if the vehicle was owned by a company and was only used for business then the vat was claimed back, which would make it vat qualifying (usually vans)
If the vehicle was bought by normal people or as a normal company car, then vat was paid and it then becomes marginal
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VAT qualifying cars include
ex-Demo cars from franchised outlets
Driving School Cars
Leased Vehicles
Cars used 100% business - does not even allow car to be driven from employees home even once!
Vans lorries etc are nearly always VAT qualifing.
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Just to sort of correct the commercial vehicle references, above, they are NOT sold as margin or qualifying vehicles, they are sold as being SUBJECT TO VAT, which means the VAT is ADDED to the bid price. Cars will be sold at bid price, the VAT element shown on the invoice, when you buy it.
VB
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