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This guidance note provides an overview of the margin scheme that can be used for selling second-hand motor vehicles (‘vehicles’). It should be read in conjunction with the Operating the margin scheme guidance note.

If a business purchases a second-hand vehicle it may be beneficial for it to use the margin scheme for the following reasons:

1. •

   there is no requirement to charge VAT on the full selling price of the vehicle as VAT is only due on the margin

2. •

   if the business does not sell the vehicle at a profit no VAT will be due on the sale

Only second-hand vehicles can be sold under the margin scheme. The scheme cannot be used if VAT has been reclaimed on the purchase of the vehicle.

Business are not required to use the margin scheme and the business can elect to sell the vehicle under the scheme or outside of the scheme where preferable. However, if a business makes a decision to sell the vehicle outside of the scheme, it cannot subsequently