Institute meeting with HMRC on 31 October 2023 deadline for second-hand motor vehicle VAT margin scheme – we need your help

Next week representatives from the Institute’s Northern Ireland Tax Committee and a number of VAT specialists from local member firms are meeting with HMRC’s VAT policy team to discuss the end of the second-hand motor vehicle VAT margin scheme on 31 October 2023. We need your assistance in gathering supporting evidence to lobby for an extension to the scheme’s deadline. Read below for the supporting evidence requested by HMRC. The meeting will also be an opportunity to discuss the new second-hand motor vehicle VAT related payment scheme. Feedback on the end of the VAT margin scheme and the new VAT related payment scheme should be emailed to the Institute by the end of Monday 2 October 2023.

As advised earlier this month, only vehicles moved from Great Britain to Northern Ireland before 1 May 2023 which are sold by 31 October 2023 qualify for the VAT margin scheme; if sold after 31 October 2023, VAT will need to be charged on the full selling price of the vehicle, and not the margin made.

We are aware that many second-hand car dealers have significant pre-1 May 2023 stock of these vehicles, which are selling very slowly due to the ongoing inflationary crisis and general economic conditions.  

If sold after 31‌‌‌ October 2023, VAT must be accounted for on the full selling price of the vehicle as the conditions for the new second-hand motor vehicle payment scheme, which only applies to eligible motor vehicles moved from Great Britain to Northern Ireland after 30 April 2023, will not be met. 

The Institute highlighted this issue to HMRC earlier in the month; as a result, HMRC has requested details or estimates in respect of the following:-

• The numbers of second-hand vehicles dealers in Northern Ireland had in stock on 1 May 2023 that were sourced from Great Britain;
• How many of these remain unsold at present, and their estimated value;
• How many are likely to be unsold on 31 October 2023, and their estimated  value; and
• If there is any category of vehicle that may be particularly affected by having a cut-off date of 31 October 2023 after which the margin scheme could no longer be used.

We recognise that many dealers may not be able to provide all of the detail requested in such a short period of time, especially the category of vehicle, but any information or evidence to support the difficulties being experienced in selling these vehicles would be appreciated.