Find out everything you need to know about VAT qualifying cars. Understand the terms VAT qualifying and Non-VAT qualifying, whether new and used cars are VAT qualifying and how to tell if you can save 20% off the purchase price of your car when you export it from the EU.
What is VAT?
Value Added Tax is the tax applied to goods and services by HM Revenue and Customs (HMRC). VAT for a car is 20%. This is included in the advertised price of a car. Buyers can reclaim the VAT for their car and reduce the price by 20% under specific circumstances.
What does VAT Qualifying mean?
A car is defined as VAT qualifying if it is either
brand new car
has been only owned by a business for business purposes for its lifetime.
You may come across the term gross VAT qualifying which means the vehicle has been registered to a business and so the VAT is still reclaimable.
What does non-VAT qualifying mean?
Any car or vehicle which has been owned privately at any point in its lifetime becomes non-VAT qualifying. The VAT is no longer reclaimable and the VAT qualifying status cannot be reinstated no matter who buys it.
Savings for (non EU) export customers buying VAT qualifying cars
Buying a VAT qualifying car for export can make you the single biggest saving, making it the holy grail of car exporting.
Overseas buyers can save 20% VAT off the advertised price of a VAT qualified car. This is because when a VAT qualifying car is exported permanently outside the EU, the VAT can be reclaimed from HMRC.
If you are buying a UK car for export, reclaiming the VAT on a VAT qualifying car is the single biggest saving you can make. To illustrate, the purchase price of a VAT qualifying car which is advertised for £36,000 drops to £30,000 as the £6,000 is reclaimable from HMRC on export from the EU.
Benefits of VAT qualifying cars for UK customers
This saving isn’t just for exporters. UK buyers who are VAT registered can also reclaim the 20% VAT if they are buying a VAT qualified car for business purposes.
Is there VAT on new cars?
All new cars are begin life VAT qualifying. If they are registered to a UK VAT registered business they remain VAT qualifying. But if they are registered to a private individual they become non-VAT qualifying.
Is there VAT on used cars?
A used or second hand car will also be VAT qualifying if it has remained registered to businesses throughout its lifetime. It becomes non-VAT qualifying once it is registered to a private owner and the VAT cannot be reclaimed.
It is fairly common to be able to find cars up to 4 years old which are still VAT qualifying. Although older the car you are looking to buy, the fewer there will be to choose from.
VAT on lease cars
If you are buying an ex-lease car from a business then there’s a good chance it will be VAT qualifying because it was purchased for business use.
VAT on commercial vehicles
VAT on vans, pickups, trucks and lorries works in the same way as cars. This also applies to motorhomes and combi-vans (i.e. vans with rear seats).
How do I reclaim the VAT back when I export a car from the UK?
It’s vital you
understand how you can reclaim the VAT
before you buy your VAT qualifying car. This video will help you to understand the options available to reclaim your VAT and how to do that risk free.
Please, be aware that some companies will ask you to pay the VAT upfront and agree to return the money when the reclaim is successful. This is risky and unnecessary. We won’t charge you the VAT. Our price will be the net of VAT price so you can reduce your financial outlay and have no risk to worry about.
Thinking of buying a VAT qualifying car?
Let our experienced sourcing team find you the best VAT qualified cars available. With over 10 years exporting experience, sourcing new and used prestige cars worldwide, our expertise and wealth of knowledge will give you access to the best cars available.