VAT Margin Scheme on sales of vehicles
A Margin Scheme is an optional method of accounting which allows certain businesses to calculate VAT based on the 'value' they add to the goods they sell, rather than on the full selling price. Without the use of the Margin Scheme, businesses would have to account for VAT on the full selling price of goods within the Margin Scheme.
There is a special Margin Scheme for the sale of second-hand cars and other vehicles. This is covered by VAT Notice 718/1 The Margin Scheme on second-hand cars and other vehicles. If you sell second-hand vehicles on which you were not charged VAT, using the Margin Scheme will save you money. There are certain conditions that must be met in order to use the scheme. This includes ensuring that the vehicles are eligible to use the scheme and that they were acquired under eligible circumstances.
The notice explains when to use the second-hand Margin Scheme to account for VAT on sales of second-hand vehicles. It also explains which vehicles can be sold under the scheme, how the scheme works, how to calculate the margin, and what records must be kept by a business using the scheme.
Source: HM Revenue & Customs | 20-05-2019