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Can private buyers take advantage of the VAT Qualifying scheme when buying a car?
My colleagues and I are having a debate about what the term 'VAT Qualifying' means when applied to a car that is obviously not 'new'. The car in question is BMW 325i M Sport Highline Convertible. The car was registered in July 2009 with 2,488 miles and has a price of £26,950 (VAT Qualifying). My question is this. To order the same (or as close as) car today would cost £41,450 (inc. VAT of £6,908.33). Hence, the advert above would represent a saving of £14,500. However, does it represent such a saving for the private buyer due to the VAT Qualifying issue? Would a private buyer be offered the £26,950 price or would he/she be expected to pay VAT on top of the £26,950 (giving a figure of £33,340)? Surely, if the actual price for the private buyer is £33,340.
Asked on 27 October 2010 by JD, via email
Answered by
Honest John
VAT Qualifying means the car has been purchased by an organisation that can reclaim the VAT, such as a car rental company or a car leasing company or a VAT registered car dealer. VAT then has to be added to the sale price and shown on the invoice so that if the purchaser also buys the car for a VAT qualifying purpose he can claim it back. A VAT registered car dealer buys on that basis. He then charges VAT and pays the VAT back to HMRC as a proportion of the sale price. In the case of this BMW, divide the £26,950 by 1.2 then multiply by 20 per cent to work out the VAT element. Eg £26,950 / 1.2 = £22,458.33 x 20 per cent = £4,491.67. But obviously a private buyer cannot reclaim the VAT element.
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