The second-hand motor vehicle payment scheme allows you to claim a VAT-related payment if you:

• buy and take possession of an eligible second-hand motor vehicle in Great Britain (England, Scotland and Wales)
• export that vehicle to the EU with the intention to resell it in the EU or to Northern Ireland
• are registered for VAT in the EU country that the vehicle is exported to

If you are also VAT registered in the UK and have a business establishment in the UK you must make any claims on your UK VAT return.

If you do not have a business establishment in the UK, including if you are a non-established taxable person there will be a different process for making a claim.

Who can use the payment scheme

If you are VAT registered in the EU, you can use the payment scheme if:

• your business activity involves buying and selling second-hand vehicles or you make occasional purchases of second-hand vehicles for resale
• you buy an eligible vehicle in Great Britain and export it to the EU with the intention to resell it in the EU or to Northern Ireland

If you buy a second-hand motor vehicle in the Isle of Man

If you buy an eligible vehicle in the Isle of Man and export it to the EU for resale, you can use this scheme to claim a payment in the same way as if the vehicle was purchased in Great Britain.

How the payment scheme works

You can use the scheme to claim a VAT-related payment for any eligible second-hand motor vehicle that you buy in Great Britain and then export to the EU for resale.

You do not have to export the vehicle from Great Britain to the EU yourself. You can arrange for the seller or another party such as a haulier or carrier to export it to the EU for you.

You must enter details of the vehicle in your stock book.

You should also provide other evidence that you intend to sell the vehicle. For example, advertising it for sale or it being on your garage forecourt.

You can only use the scheme if your intention is that the first use to which you put the vehicle when you export it to the EU is to resell it. You cannot use the scheme if you intend to use it within your business or privately, even if you intend to sell the vehicle afterwards.

You can use the scheme if you plan to hold the vehicle out for sale but need to do repair or other work on it first. You can also use the scheme if you hold the vehicle out for resale but use it for another purpose (such as a courtesy car) for a short period of time while trying to sell it.

How to calculate the payment amount

The payment amount is calculated on the UK VAT fraction on the value of the vehicle that you purchased in Great Britain at the time that you export it to the EU.

In most cases the value will be the full purchase price you paid for the vehicle.

An example of working out the payment amount

If the rate of UK VAT is 20%, you should apply the UK VAT fraction of one-sixth to the purchase price paid in Great Britain (everything paid for the vehicle as part of the eligible purchase). You should not include any cost of bringing the vehicle to sale.sale For(for example,example the cost of any repairs you have made before resale.resale).

How to claim a payment if you have a business establishment in the UK

If you are also VAT registered in the UK and have a business establishment in the UK, you must make any payment claims on your UK VAT return.

You should make the claim on your UK VAT return for the period in which you exported the vehicle from Great Britain to the EU and treat the payment amount as if it were input tax.

You must keep records showing:

• the calculations of the payment value
• that at the time you exported the vehicle to an EU country, you were registered for VAT in that country

You should follow the normal rules for completing your UK VAT return.

How to work out whether you have a business establishment in the UK

For the purposes of the payment scheme, you will only be treated as having a business establishment in the UK if:

• you have a permanent presence of people and technical resources at that establishment
• these people and technical resources primarily deal with the supply of goods and services that are taxable in the UK

How to claim a payment if you do not have a business establishment in the UK

Find out how to claim a VAT-related payment using the second-hand motor vehicle payment scheme if you do not have a business establishment in the UK, including if you’re a non-established taxable person.

Accounting for VAT on the vehicle when you sell it on

You should account for VAT on the sale in accordance with the rules of the country where the sale is made.