A Guide to the Second-hand Motor Vehicle Scheme in Great Britain and Northern Ireland

Introduction

The Second-hand Motor Vehicle Scheme is a valuable initiative that allows businesses in Great Britain to make claims on Value Added Tax (VAT) related payments when purchasing second-hand motor vehicles for exclusive business use. While this scheme has yet to be introduced in Northern Ireland, the good news is that it's set to take effect from May 1st, 2023. In this article, we'll explore who is eligible for this scheme, how to calculate your claim, and the steps involved in making a successful claim.

Who Can Benefit from the Second-hand Motor Vehicle Scheme?

The Second-hand Motor Vehicle Scheme is designed to assist businesses registered for VAT in Great Britain that have incurred costs related to second-hand motor vehicles exclusively used for business purposes. Whether you're a long-established company or a new business venture, if you meet these criteria, you can benefit from this scheme.

Cross-Border Purchases

If you purchase a second-hand vehicle in Great Britain and subsequently move it to Northern Ireland, you can still make a claim under the Second-hand Motor Vehicle Scheme.

Calculating Your Scheme-Related Claim

To ensure a valid claim under the Second-hand Motor Vehicle Scheme, you must provide specific documentation, including:

1. A copy of your VAT registration certificate.
2. A copy of the second-hand motor vehicle invoice.
3. Proof that the second-hand motor vehicle is exclusively used for business purposes.

Your claim amount is calculated as follows:

1. Add up all the costs associated with purchasing the second-hand motor vehicle, including the purchase price, delivery costs, and any other relevant expenses.
2. Calculate your scheme-related claim as a percentage of the total cost. Currently, this rate stands at 20% of the total second-hand motor vehicle cost, inclusive of VAT.

How the Second-hand Motor Vehicle Scheme Works

Once you've calculated your scheme-related claim, you can proceed to submit your claim to Her Majesty's Revenue and Customs (HMRC). Be prepared to provide the following information:

1. Your VAT registration number.
2. The second-hand motor vehicle invoice.
3. Proof of exclusive business use for the vehicle.

Additionally, it's essential to retain evidence demonstrating your intention to resell the vehicle. The scheme can be used unless you intend to move the vehicle to Northern Ireland for resale or if you plan to retain it temporarily for repairs before resale.

Upon approval of your claim, you'll receive a payment by cheque in the mail. It's worth noting that this payment can only be applied to second-hand motor vehicles purchased in Great Britain.

Conclusion

The Second-hand Motor Vehicle Scheme brings much-needed relief and support to businesses in Great Britain, offering an opportunity to recoup VAT-related expenses incurred on second-hand vehicles used exclusively for business purposes. As this scheme extends its reach to Northern Ireland from May 1st, 2023, it opens up new possibilities for businesses in the region.

By adhering to the documentation requirements and fulfilling the scheme's criteria, you can make the most of this financial benefit. So, if you're a business in Great Britain or have plans to engage in cross-border vehicle transactions, the Second-hand Motor Vehicle Scheme is a valuable resource that can help you optimize your financial position and streamline your operations.

Note: Please note that the content of the above blog and the aforementioned information are solely for the purpose of awareness and are informative in nature. The content is designed with intent to ease the understanding while preserving the essence and importance of the compliance rules and shall not be considered as an ultimate replication of the rules. Affotax does not own any responsibility whatsoever for any unpleasant event that may arise due to the misinterpretation of a specific part or whole of the information.