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 UK.

What is VAT?

Value Added Tax is the tax applied to goods and services by HM Revenue and Customs (HMRC). VAT for a UK 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 OR 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.

What is a margin car?

A margin car refers to VAT margin cars. A VAT margin car means the car is non-VAT qualifying. This is because a previous sale of the vehicle included the VAT in the transaction. Once the VAT has been paid, the car becomes a non-VAT qualifying vehicle and this cannot be reversed in the lifetime of the vehicle.

What is a VAT deductable car?

The term VAT deductable refers to a car which is still VAT qualifying.

Savings for car 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 UK, 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 UK.

VAT saving example on export cars

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.

VAT on cars: how does it work?

VAT is charged when a car is sold to a private individual. It is charged at 20% which is equivalent to one sixth of the car’s price. VAT isn’t usually broken down on a car advert. There are two methods to calculate the VAT that is being charged.

  1. Advertised price divided by 6 = the VAT being charged
  2. Advertised price divided by 1.2 = the car’s sale price without the VAT

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.

VAT on used cars

A used car 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 Pre-registered cars

A pre-registered car is a brand new car which is been owned by a car dealership or a lease company. This means it will be VAT qualifying as it is owned by a business from new and not a private individual.

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 company cars

Company cars are often VAT qualifying if they have been owned by the business and not registered to an individual in the business. Watch out for dealership cars as they may have registered the car to a specific manager in their team. This changes the car’s status to non-VAT qualifying.

VAT on electric cars

In the UK an electric car is not exempt from VAT. The same rules apply to electric cars as petrol and diesel cars. New electric cars are VAT qualifying until they are sold to a private individual. They retain their VAT qualifying status whilst they are owned by a business.

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.

Who can claim the VAT back?

Private individuals are no longer allowed to claim the VAT back. Even if you are visiting the UK temporarily then you cannot reclaim the VAT on your purchases. A UK VAT registered person needs to reclaim the VAT for you. This needs to be done in the correct way so we would advise they are experienced at Vat reclaim on cars. If you are buying a car from a non-export dealer they are very unlikely to reclaim the VAT for you. If you have found your perfect car at a non-export dealer then get in touch and we will help you buy and export the car VAT free.

List of VAT qualifying cars

Our stock list features a huge list of VAT qualifying cars which are for sale in the UK today. This is an easy way to see the range of VAT qualifying cars which you could buy and export from the UK. Our stock list is updated daily with new cars which are being advertised. Take a look at them and let us know if you see a VAT qualifying car you love. Or get in touch and let us know what you are looking for and our sourcing specialists will be very happy to help you source a VAT qualifying car and export it to you.

Personal Export Scheme

Find out about the Personal Export Scheme if you are hoping to buy a VAT qualifying car to drive in the UK and Europe and export it up to 12 months of buying your car.

Thinking of buying a VAT qualifying car?

Let our experienced team find you the best VAT qualified cars available. With over 15 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.

Export a VAT qualifying car with the experts in car export