Successful Institute lobbying on VAT margin scheme

Jan 18, 2021

Last week the Chancellor of the Duchy of Lancaster announced in Parliament that the Government is seeking to reinstate the VAT margin scheme in NI on second hand cars purchased from GB which it previously had stated would not be available after the end of the EU transition period. This Institute has been lobbying HMRC to seek a derogation and reinstate the scheme for second hand goods since HMRC published the first version of its guidance on changes to accounting for VAT for Northern Ireland on 26 October. The derogation requested relates to vehicles only.

The Institute wrote to HMRC, the European Commission, Ministers in the Irish Government and Diane Dodds, MLA to express concerns in respect of the VAT margin scheme and other areas of the VAT guidance for NI. The Institute has also been voicing its concerns in several meetings with HMRC’s VAT policy team working in this area.

HMRC has also published updated guidance on changes to accounting for VAT for Northern Ireland and Great Britain from 1 January 2021. The updated guidance confirms that HMRC’s treatment of another issue of concern has also been amended following our lobbying which specifically relates to a relaxation in some cases on the strict VAT treatment where goods are sold to the EU from GB via NI.

The Institute continues to engage with Government and HMRC on matters relating to the end of the EU transition period.

HMRC has since written to us to confirm the change announced in Parliament on the VAT margin scheme for NI as follows:-

“I am writing to you from HMRC following recent Government announcements regarding the operation of the VAT second-hand margin scheme in Northern Ireland.

As you will be aware, VAT will continue to be accounted in much the same way as it is currently on most goods sold by a VAT registered business between Great Britain and Northern Ireland.

We are aiming to minimise disruption for traders moving goods from Great Britain to Northern Ireland.

We have heard the concerns raised about the use of the second-hand margin scheme in Northern Ireland with respect to motor vehicles sourced in Great Britain. We understand the impact this may have on traders and consumers in Northern Ireland and so we have been exploring options to minimise this. We would like to thank you for your engagement with us on this issue.

In the interest of both traders and consumers, the Government is looking to agree a long-term derogation with the European Commission to allow the margin scheme in Northern Ireland to apply in respect of motor vehicles sourced in Great Britain. 

In the interim, please see the following guidance issued on how traders can continue to apply the margin scheme in relation to motor vehicles sold since the end of the transition period: https://www.gov.uk/guidance/the-margin-scheme-on-second-hand-cars-and-other-vehicles-vat-notice-7181.”