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Mon 8 Nov 2010 22:32

Vat - Vat Qualifying vehicles, an expensive option? - JohnDeere

If two identical s/h cars were advertised and one of those was a "Vat qualifying" car, would one expect this to be more expensive than its equivalent non qualifying counterpart as a much larger percentage of the price will go to HMRC and not the dealer?

If this was correct, then a good rule of thumb for the private 'non vat registered' person would be to avoid them as they are a more expensive option ?

I understand basically how the scheme works but cannot make my mind up on this matter. The reason I ask is that I want to replace my car and due to being disabled I can buy a new car with vat @ 0% and I'm pretty certain I can do the same with a 'vat qualifying' s/h model.

Obviously I want value for money, ie least depreciation say over 2yrs of ownership. I am planning on spending £40k ish on a mid model Merc E class. I have 3 options :-

1. Buy a new car, get the 14.89% (or whatever it is) off the purchase price. Sell in 2 yrs without having to charge vat

2. Buy a s/h 6 month old demo car, save say 3k ish, and then sell 2yrs later without adding vat

3. Buy a s/h 6 month old car that is non qualifying and sell 2yrs later.

Choices 1 &2 look best, probably 2, as someone else would of suffered some of the depreciation. However when I sell the car it will be 6 months older, will this partially counteract the £3k ish saving do you think?

If the s/h vat qualifying cars are more expensive in the first place, then option 3 could be equally as attractive.

What do you all think ?

Edited by JohnDeere on 08/11/2010 at 22:34

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Tue 9 Nov 2010 09:47

Vat - Vat Qualifying vehicles, an expensive option? - bonzo dog

Hi John, if you are looking at it from a purely financial point of view then buying a used car will be best as the rate of depreciation reduces the older the car gets although this will depend on the month you sell it in relation to the next plate change.

I would think that option 2 (a VAT qualifying pre-reg car) would be the most financially atrractive route.

My other thought is that having the additional 6 to 7 grand available (the VAT) to spend you might want to have a brand spanking new merc in the drive.

There is another thing that jumps to mind though, & please don't think I'm having a go at you, merely questioning the system of VAT being reclaimable for disabled drivers. Surely the objective is to enable the disabled to buy reliable cars to assist them with their mobility issues & NOT to make the purchase of expensive luxury cars more affordable by being subsidised by the state? Thoughts anyone?

Edited by bonzo dog on 09/11/2010 at 09:48

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Wed 10 Nov 2010 09:30

Vat - Vat Qualifying vehicles, an expensive option? - pd

For the selling dealer the net amount they pay to HMR&C is exactly the same whether they calculate it via the margin scheme or as a VAT qualifying car.

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Wed 10 Nov 2010 09:58

Vat - Vat Qualifying vehicles, an expensive option? - bonzo dog

pd says:

For the selling dealer the net amount they pay to HMR&C is exactly the same whether they calculate it via the margin scheme or as a VAT qualifying car

My calculations would agree the VATman receives the same, but John reckons he can reclaim the VAT on the purchase of a VAT qualifying used car, thus costing him less than an equivalent non-qualifying car or purchasing a more expensive car for the same outlay.

Although, as I've said before, I do struggle with VAT qualifying cars so please educate me if I've got it wrong :)

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Wed 10 Nov 2010 09:32

Vat - Vat Qualifying vehicles, an expensive option? - pd

If two identical s/h cars were advertised and one of those was a "Vat qualifying" car, would one expect this to be more expensive than its equivalent non qualifying counterpart as a much larger percentage of the price will go to HMRC and not the dealer?
, Sorry, that's completely wrong and you have misunderstood how VAT works on used cars. No more of the price will go to HMRC than with a non-qualifying car.
Edited by pd on 10/11/2010 at 09:32

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Wed 10 Nov 2010 14:17

Vat - Vat Qualifying vehicles, an expensive option? - tmjs

My girlfriend is thinking about replacing her car and she should be able to claim VAT back as she has MS.

Anyway my understanding (hopefully someone can correct me if I'm wrong on anything) is that to claim VAT back you need to be a disabled wheelchair user and the vehicle must have been specially adapted for your use.

As far as VAT goes, my understanding is that VAT is charged on the full price for a new car, but a second hand car has VAT charged on the difference between what the dealer paid for it and the price they sell it for (i.e. the Value Added). I think a VAT Qualifying car means a business could claim back the VAT paid on it, but it makes no difference if you're a private buyer.

It seems like you'd save a lot on a new car, but not very much on a second hand one. My girlfriend is thinking of getting a new Vauxhall as the 100,000 mile lifetime warranty should last her around 15 years.

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