The Minister for Finance announced the introduction of a new VAT Margin Scheme on second-hand cars from 1 January 2010. Under the Margin Scheme, dealers will account for VAT on their profit margin - the difference between the cost of acquiring the car and its reselling price.
Appropriate transitional arrangements will be put in place to take account of the fact that under the Margin Scheme, dealers will no longer be able to reclaim or deduct the amount of VAT that under the Special Scheme is taken to be included in the price of the second-hand car at the time of its acquisition by the dealer.
The scheme will apply to all second hand cars purchased and resold on or after 1 January 2010.
The VAT Margin Scheme, including the transitional arrangements, will also apply to second-hand agricultural machinery.
With the exception of Ireland and Denmark, currently all EU Member States apply the Margin Scheme to second hand motor vehicles. The introduction of the scheme will bring Ireland into line with other EU Member States.
According to official statement, the necessary legislation will be contained in Budget and Finance Bill 2010.