People buying cars from the UK who wish to export them beyond the EU need to know how this reclaim process actually works. Not all UK dealers are set up to do this and some will ask you to cover the VAT until it has been returned from the UK Tax office. But you can buy your car without having to pay for the VAT at all. This article will help you to understand the options available to you and the best way for you to buy your car tax free from the UK stress free.
Many people we have met over the years have bought cars from the UK can never recovered the VAT. Perhaps because they didn’t know how to or the advice they had been given wasn’t very accurate or the people who promised to reclaim it for them didn’t deliver on their promise and so never approved by the UK Tax office. This is always disappointing to hear and we hope this article will help to stop these issues from happening.
How is a car VAT qualifying?
A car that is eligible for the VAT to be reclaimed is known as a VAT qualifying car. All new cars start life as being vat qualifying and can remain VAT qualifying so long as they continue to be owned by a business. 20% VAT is applicable on all UK cars that have been owned by a private individual at any point in their life. A car cannot once again become eligible for VAT free status at any point in its life once it has been privately owned. Naturally the older a car is, the less likely it is to be VAT qualifying.
How to Buy a VAT Free Car:
When it comes to buying a car that is VAT reclaimable, you have three potential options to buy:
Option 1: Reclaiming the VAT yourself
You can contact a UK dealer directly, pay for the car and on the invoice it will show the proportion of VAT you are paying that you can legitimately reclaim from the UK Tax office. With that invoice you can make a claim, but you would need to be in the UK to process the documentation correctly. The process in very involved as you have to provide information about yourself, your circumstances , the car you are buying and proof it has been permanently exported beyond the EU. If you are receiving assistance and during this process you need to be careful that the car doesn’t become registered to a private UK address this may well cause your claim to be invalidated because it will show the car has been owned by a private individual who is not VAT registered and they are not eligible themselves to reclaim the VAT on your behalf.
Option 2: Via a UK Independent Dealer
Large franchise dealerships in the UK will not help you to reclaim the VAT on your car. This is simply not their core business. You may find an independent UK dealer will process the VAT for you. It is not uncommon for thee dealers to need you to pay for the VAT whilst the claim is being processed on agreement that they will reimburse you when they receive it. This tends to be when the car has been permanently exported. This is a high risk strategy as we often hear of situations where the VAT is not returned to the buyer.
We are frequently asked to assist at this point when an individual has discovered that the dealer is not willing to support them. We are told of experiences where the reclaim process is being asked to submit information over and above the standard claim procedure. This can be an attempt to over complicate the reclaim to the point that you simply give up reclaiming your VAT with the supplier then claiming it as profit on their bottom line. This is not uncommon and a problem we see all too often and is a sad consequence of not being in the country and people trying to take advantage of that position.
Option 3: Via a Reputable Importer
The good news is, it’s not all doom and gloom! There are reputable importers who make it their mission to provide the VAT reclaim as a benefit of their car export service. At MHH International reclaiming the VAT on our cars is a core part of the export service we provide. The UK tax office know us well as we are constantly submitting our VAT reclaim for our clients’ cars. There is an additional benefit to us being the exporter of the car as we automatically have the required export paperwork making it easier to complete the process.
Do I need to pay VAT upfront?
We have become so adept at the reclaim process it is now very quick for us so we don’t ask our clients to cover the VAT during the reclaim period. It is a cost that we bear on your behalf. Therefore all prices we quote our clients are automatically net of VAT where applicable.
To illustrate; if you are buying a VAT qualifying car for £24,000, the purchase price drops to £20,000 as the £4,000 is the VAT which is reclaimed when you buy the car with us. This is the most efficient way for you to buy a UK car as there is no need for you to pay the £4,000 whilst the reclaim is being processed. Naturally this makes it the preferred way for people to buy their cars.
So in summary, when you are buying a car from the UK that is less than three years old, you definitely want to be finding a car which is VAT qualifying. Not all cars which are VAT qualifying are advertised as such but an experienced buyer can help to find these cars more easily. (We have learnt over the years to spot the hallmarks.) We recommend you always work with a reputable supply partner who is regularly processing the VAT reclaim and are not requiring you to cover the VAT during the reclaim process. This is much easier, more professional and reduces your risk significantly. They will also be a valuable set of eyes to help you assess the quality of your car, help you negotiate your price and export it with ease to you.
As you can see in the photo at the top, people are prepared to queue for hours and hours at UK airports to reclaim the VAT for all kinds of items they have purchased here. A handbag or new coat is one thing but not to be recommended for a car. Get the professionals to do it for you so you get the 20% saving and simply relax and look forward to the day you drive your new car home.