VAT liability when selling on imported used cars...

isnottheword

I've fallen in to a situation whereby I'm importing 2nd hand cars from the UK as a non authorised dealer, then selling them onwards. I've only done this with a couple of cars at the moment but may continue to do this as a hobby (with some financial upside).

Naturally, I understand that I have an obligation to declare as per regular tax returns. However, do I have an obligation in terms of VAT? i.e. should I be accounting for VAT when I sell a car on - on this basis? If so, would this be 23% based on the margin between the price I buy a car at - and the price I sell at?

Don't want to sleep walk myself into problems here - so pretty keen to try and get a definitive understanding of what my obligations are in this respect.

colm_mcm

Look up "VAT margin scheme"

R.O.R

Depends if the cars you buy are vat qualifying or on the margin scheme from the UK.

isnottheword

colm_mcm wrote: »

Look up "VAT margin scheme"

Thanks both. There is a guidance document from Revenue here but I'm having trouble getting my head around it.

In looking at the VAT margin scheme, is it a case that I have a VAT obligation on the difference between the amount I paid for the car and the amount that I sell the car at in Ireland (i.e. apply 23% standard VAT within the difference)?

Can I even do this if I'm not an 'authorised dealer' and not registered for VAT? I've only really brought in 3 cars over the last couple of months. I tend to buy them and register them as a private individual (and I do use them for personal use - for a time at least).

R.O.R wrote: »

Depends if the cars you buy are vat qualifying or on the margin scheme from the UK.

If I understand this correctly, sometimes UK based traders (and these are exceptions to the rule generally in terms of what's available) offer a 'vat qualifying' car. If I avoid this, then am I ok to trade away??

grogi

isnottheword wrote: »

I've fallen in to a situation whereby I'm importing 2nd hand cars from the UK as a non authorised dealer, then selling them onwards. I've only done this with a couple of cars at the moment but may continue to do this as a hobby (with some financial upside).

http://www.revenue.ie/en/tax-professionals/tdm/value-added-tax/part03-taxable-transactions-goods-ica-services/Goods/goods-second-hand-goods.pdf

goochy

Being Honest don't have much time for this carry on , assume you don't stand over cars you sell and you are aware its technically illegal ?

grogi

goochy wrote: »

Being Honest don't have much time for this carry on , assume you don't stand over cars you sell and you are aware its technically illegal ?

It depends what the service is... If the cars are brought for order and paid by the buyer with the OP acting as an agent, then there is no warranty requirement.

isnottheword

goochy wrote: »

Being Honest don't have much time for this carry on , assume you don't stand over cars you sell and you are aware its technically illegal ?

Why does it seem recently that every post goes immediately off topic with people bringing their own prejudices in to it - and most importantly, not central to the query that was asked?... You don't like it - fine - we can start another thread and debate it out - I'd even welcome it - as I may learn something. Other than that (and please, let's leave it at this! - any car I bring in is coming with manufacturers warranty intact. I'm also liable to be sued if I supply a product not fit for purpose I would imagine). If you feel the compulsion to reply - please don't - pm me - and I'll open up a separate thread if you want to vent your frustration there and/or debate the issues through there).

@Grogi : Thanks for the link. However, I'm still having difficulty in terms of interpretation as per my queries further above. Very grateful if someone can confirm explicitly subject to my own individual scenario as outlined.

kona

goochy wrote: »

Being Honest don't have much time for this carry on , assume you don't stand over cars you sell and you are aware its technically illegal ?

Its not illegal.

goochy

Well I certainly wouldnt buy off you going by your attitude and unless you are a business you cannot be sued . It is illegal and you doing proper dealers out of it who do things properly and pay taxes and don't have a chip on their shoulders .

isnottheword

goochy wrote: »

Well I certainly wouldn't buy off you going by your attitude and unless you are a business you cannot be sued . It is illegal and you doing proper dealers out of it who do things properly and pay taxes and don't have a chip on their shoulders .

I kindly and courteously asked you not to drive a totally different topic by way of this thread (and even went as far as to invite you to debate out that topic by way of a separate thread if you are of a mind to do so).
Again, can we please park up your query and run with the subject of the thread.
Thanks in advance for your cooperation.

Other than that, I'm trying my best to remain tax compliant - and would welcome input based on the circumstances I described further above.

Del2005

grogi wrote: »

It depends what the service is... If the cars are brought for order and paid by the buyer with the OP acting as an agent, then there is no warranty requirement.

Isn't there an amount of vehicles that you sell before you are considered a dealer and need to offer a warranty? The OP is registering the cars in their own name so isn't acting as an agent.

mikeecho

WTF.. why are people volunteering to pay tax.

If you run a little business on the side, or get a guy to do a job for cash... why not. (I don't want that answered)

Cash makes this country work.

isnottheword

mikeecho wrote: »

WTF.. why are people volunteering to pay tax.

If you run a little business on the side, or get a guy to do a job for cash... why not. (I don't want that answered)

Cash makes this country work.

I don't want this to open into some moral debate(!!) but I'm transferring cash electronically when I buy - that's the way by and large the brits expect payment in.....so there's a degree of visibility as regards what I'm doing if i get audited

isnottheword

Revenue have a section on this dealing specifically with the motor trade and imports, etc.

"11. VAT due on sales of second-hand motor vehicles
In the case of Irish-registered second-hand vehicles, VAT is due on the difference between the sale price and the purchaser price of the vehicle. Under no circumstances can any portion of the price, e.g. the VRT element, be separated from the rest of the sale price when calculating the VAT liability. Where an authorised dealer brings a second-hand vehicle into the State that has been registered in another country, he/she is not obliged to register the vehicle in Tax and Duty Manual VAT and VRT on transactions involving Motor Vehicles 8 Ireland until it is being sold. At that stage, the dealer is obliged to ensure that the vehicle is registered in Ireland in the name of the purchaser (or the nominated person, where the purchaser is a company) before the vehicle is released to the purchaser. In this situation Revenue generally accepts that the portion of the sale price that represents the VRT liability is paid by the dealer in the name and on the account of the purchaser, i.e. the customer pays the VRT, and the dealer simply administers the payment from the money handed to him or her. Accordingly, the VAT liability on the sale by an authorised motor dealer of a secondhand vehicle, brought into the State from another country, is generally calculated on the VRT-exclusive amount received from the customer. (This also applies in the case of a new vehicle sold by an authorised dealer prior to being registered in Ireland.) In the case of the sale of a second-hand vehicle by any person other than an authorised dealer, a VAT liability arises on the full VRT-inclusive amount received, and no adjustment is allowed."

I guess I'm not an 'authorised dealer' - given that I'm not VAT registered either, then I suppose it's that last sentence that's of relevance;

"In the case of the sale of a second-hand vehicle by any person other than an authorised dealer, a VAT liability arises on the full VRT-inclusive amount received, and no adjustment is allowed."

I don't really understand. What I've read elsewhere is that you can only collect VAT if you're VAT registered??. However, I'd be liable for VAT on which amount exactly (cars are electric - so there's a refund or allowance (up to the first €5k) on VRT.
What do they mean by the full VRT inclusive amount? I charge VAT on the full cost of the car??? (if so - it seems totally unsustainable) - or I can just do so on the margin between purchase price in the UK and sales price in Ireland?

grogi

goochy wrote: »

Well I certainly wouldnt buy off you going by your attitude and unless you are a business you cannot be sued . It is illegal and you doing proper dealers out of it who do things properly and pay taxes and don't have a chip on their shoulders .

Of course one can be sued.

mikeecho

Cash is king




In GOD we trust ... all others pat cash

NewApproach

goochy wrote: »

Being Honest don't have much time for this carry on , assume you don't stand over cars you sell and you are aware its technically illegal ?

goochy wrote: »

Well I certainly wouldnt buy off you going by your attitude and unless you are a business you cannot be sued . It is illegal and you doing proper dealers out of it who do things properly and pay taxes and don't have a chip on their shoulders .

Sources please, like a good lad

Del2005

isnottheword wrote: »

Revenue have a section on this dealing specifically with the motor trade and imports, etc.

"11. VAT due on sales of second-hand motor vehicles
In the case of Irish-registered second-hand vehicles, VAT is due on the difference between the sale price and the purchaser price of the vehicle. Under no circumstances can any portion of the price, e.g. the VRT element, be separated from the rest of the sale price when calculating the VAT liability. Where an authorised dealer brings a second-hand vehicle into the State that has been registered in another country, he/she is not obliged to register the vehicle in Tax and Duty Manual VAT and VRT on transactions involving Motor Vehicles 8 Ireland until it is being sold. At that stage, the dealer is obliged to ensure that the vehicle is registered in Ireland in the name of the purchaser (or the nominated person, where the purchaser is a company) before the vehicle is released to the purchaser. In this situation Revenue generally accepts that the portion of the sale price that represents the VRT liability is paid by the dealer in the name and on the account of the purchaser, i.e. the customer pays the VRT, and the dealer simply administers the payment from the money handed to him or her. Accordingly, the VAT liability on the sale by an authorised motor dealer of a secondhand vehicle, brought into the State from another country, is generally calculated on the VRT-exclusive amount received from the customer. (This also applies in the case of a new vehicle sold by an authorised dealer prior to being registered in Ireland.) In the case of the sale of a second-hand vehicle by any person other than an authorised dealer, a VAT liability arises on the full VRT-inclusive amount received, and no adjustment is allowed."

I guess I'm not an 'authorised dealer' - given that I'm not VAT registered either, then I suppose it's that last sentence that's of relevance;

"In the case of the sale of a second-hand vehicle by any person other than an authorised dealer, a VAT liability arises on the full VRT-inclusive amount received, and no adjustment is allowed."

I don't really understand. What I've read elsewhere is that you can only collect VAT if you're VAT registered??. However, I'd be liable for VAT on which amount exactly (cars are electric - so there's a refund or allowance (up to the first €5k) on VRT.
What do they mean by the full VRT inclusive amount? I charge VAT on the full cost of the car??? (if so - it seems totally unsustainable) - or I can just do so on the margin between purchase price in the UK and sales price in Ireland?

They mean that if you buy the car for the equivalent of €30k and there's €10k VRT you pay VAT on the €40k. Don't think the €5k allowance will reduce the liability to €35k.

You have to register for VAT if you earn of x amount per annum, put you still have to pay VAT. You can still register for VAT even if below the threshold.

goochy

goochy wrote: »

Well I certainly wouldnt buy off you going by your attitude and unless you are a business you cannot be sued . It is illegal and you doing proper dealers out of it who do things properly and pay taxes and don't have a chip on their shoulders .

What's illegal about it? Buy a car, register it in your name drive it for a little while and sell it on? If that's illegal then every car on donedeal for private sale is illegal, which they are not and nor is what the op is doing.

millington

I do the same myself. Revenue will be on to you especially if you're VRTing them yourself.


Out of interest, what sort of stuff are you selling?

grogi

millington wrote: »

I do the same myself. Revenue will be on to you especially if you're VRTing them yourself.


Out of interest, what sort of stuff are you selling?

mdebets

Milana Flabby Harpist wrote: »

What's illegal about it? Buy a car, register it in your name drive it for a little while and sell it on? If that's illegal then every car on donedeal for private sale is illegal, which they are not and nor is what the op is doing.

If you do it once (what most private sales on donedeal are), it's fine. If you do it on a regular basis, especially if you make a profit on each one, you are being a dealer and have certain obligations to revenue and the buyer. If you don't fulfill them, then it's illegal.

grogi

mdebets wrote: »

If you do it once (what most private sales on donedeal are), it's fine. If you do it on a regular basis, especially if you make a profit on each one, you are being a dealer and have certain obligations to revenue and the buyer. If you don't fulfill them, then it's illegal.

What is 'a regular basis'? How often do you need to do it to be liable to VAT?
How long do you need to keep the car not to liable for the income tax?

mdebets

grogi wrote: »

What is 'a regular basis'? How often do you need to do it to be liable to VAT?
How long do you need to keep the car not to liable for the income tax?

I don't think that there is a fixed number in Ireland, but I would think that revenue or a judge would look at the total dealings of a person, to decide if he is a dealer or not.

Marcusm

grogi wrote: »

What is 'a regular basis'? How often do you need to do it to be liable to VAT?
How long do you need to keep the car not to liable for the income tax?

VAT turnover threshold is €75k in Ireland. Sell goods, in aggregate, for less than that then you don't need to charge VAT. Second hand car dealers will hit that fairly quickly and will want to register quickly do that they can apply the margin scheme, buy car for 10, sell for 15 and only account for vat on 23/123 of 5. If not registered, can't apply margin scheme so when caught stuck for 23/123 of 15.

isnottheword

Del2005 wrote: »

They mean that if you buy the car for the equivalent of €30k and there's €10k VRT you pay VAT on the €40k. Don't think the €5k allowance will reduce the liability to €35k.

Are you saying €40k + 23%? i.e. €9k in VAT?:eek:

Surely the VAT has already been paid in the UK - and there should be no need to apply VAT a second time (even if they're 2 different States, they're both within the EU (at least for the moment!))?.
At worst, it would be logical that VAT would be imposed on any difference or margin between purchase price and sales price...

Del2005 wrote: »

You have to register for VAT if you earn of x amount per annum, put you still have to pay VAT.

Is it €70k - and is that €70k worth of sales/turnover (i.e. not profit)?

Del2005 wrote: »

You can still register for VAT even if below the threshold.

If I can help it, I'd prefer not to - don't want the overhead of the paperwork that goes with that.

mdebets wrote: »

I don't think that there is a fixed number in Ireland, but I would think that revenue or a judge would look at the total dealings of a person, to decide if he is a dealer or not.

Seems very wishy washy for something that could very easily be clearly defined.

Del2005

isnottheword wrote: »

Are you saying €40k + 23%? i.e. €9k in VAT?:eek:

Surely the VAT has already been paid in the UK - and there should be no need to apply VAT a second time (even if they're 2 different States, they're both within the EU (at least for the moment!))?.
At worst, it would be logical that VAT would be imposed on any difference or margin between purchase price and sales price...


Is it €70k - and is that €70k worth of sales/turnover (i.e. not profit)?

If I can help it, I'd prefer not to - don't want the overhead of the paperwork that goes with that.


Seems very wishy washy for something that could very easily be clearly defined.

You would have to reclaim the VAT from the UK or if you are VAT registered then you can buy VAT free. A trader has to pay VAT in their country, a private person can purchase VAT free from the EU.

I don't think that €70k is when you need to charge VAT it's when you have to register, you have to charge VAT on all transactions. To be tax compliant ask an accountant not random people on the Internet

The reason it's vague on the amount of items you can sale is that you could sell 1 item for €80k and be liable or 4 for €1k and not be liable. Again you need to talk to an accountant or revenue to find the correct answer.

grogi

Del2005 wrote: »

Again you need to talk to an accountant or revenue to find the correct answer.

One is perfectly capable of finding correct answer alone.

isnottheword

Del2005 wrote: »

You would have to reclaim the VAT from the UK or if you are VAT registered then you can buy VAT free. A trader has to pay VAT in their country, a private person can purchase VAT free from the EU.

Ok, so regardless of what terms upon which I buy the car or from home (trader, dealership, leasing company, private individual, auction house, etc.), I can contact HMRC in the UK and apply for a VAT refund (based upon the amount I paid for the car)?

grogi

isnottheword wrote: »

Ok, so regardless of what terms upon which I buy the car or from home (trader, dealership, leasing company, private individual, auction house, etc.), I can contact HMRC in the UK and apply for a VAT refund (based upon the amount I paid for the car)?

No. You can ask them for refund only when exporting a new vehicle.

R.O.R

grogi wrote: »

No. You can ask them for refund only when exporting a new vehicle.

Or a VAT qualifying vehicle.

I don't think you have to charge VAT if you are not VAT registered. The 3rd party valetor and local transport guys we used in my previous job weren't VAT registered and would invoice at 0% VAT rate.

grogi

R.O.R wrote: »

Or a VAT qualifying vehicle

Sure

I don't think you have to charge VAT if you are not VAT registered. The 3rd party valetor and local transport guys we used in my previous job weren't VAT registered and would invoice at 0% VAT rate.

This.

Until the trader is VAT registered, he does not pay VAT. When he registers, either freely or by reaching the threshold, the VAT is due - and I think (though I am not sure) it will be due on all transactions retrospectively in the year. Other options might be the VAT will be due on transactions from the moment of registration or from the beginning of next fiscal year.

The VAT due should be calculated by using the margin scheme. So if a car purchased for €10k is sold for €15k, the VAT is calculated as (15k-10k)*(1-1/1.23) = €935. In addition to the VAT, the trader is liable for the income tax. The base is calculated as the profit minus paid VAT - so in this case €4065. All the additional expenses - flights, ferries, VRT test, NCT test, repairs, VRT paid etc - reduce the VAT liability (you can account the VAT paid when the VAT amount is separately listed on the invoice) and income tax liability.

But of course never trust an anonymous guy on the Internet.