Do you charge VAT when you sell a company car?

The question of whether or not you are required to charge VAT when selling a company car depends on how the vehicle was bought and whether VAT was recovered at the time. Understanding these distinctions can help ensure the correct VAT treatment and avoids costly errors.

If your business sells a car on which VAT was recovered, such as a pool car or driving school vehicle, you must charge VAT on the full selling price and issue a VAT invoice if requested. These sales are not VAT-exempt and cannot use the second-hand margin scheme.

If VAT was charged but blocked when the car was bought, you do not charge VAT on the sale. The sale is VAT-exempt, and no VAT invoice can be issued. Any VAT directly linked to the sale, such as auction fees, is also exempt input tax.

Where VAT was not charged on purchase, for example if the car was bought from a private individual or under the margin scheme, you may sell it using the VAT margin scheme, accounting for VAT on the profit margin.

For commercial vehicles, VAT is charged on the full sale price if any VAT was charged when the vehicle was purchased. If no VAT was charged (for example, on a van bought from a private individual), the margin scheme can be used.

Special rules apply for vehicles bought from an insurance company or finance house, second-hand vehicles moved from Great Britain to Northern Ireland and exported vehicles, which are usually zero-rated if conditions are met.

If you want to chat to us about VAT, give our expert and friendly team a call on 01380 723692 or email us here.