When looking at car dealer’s websites, you may have seen vehicles advertised as “VAT Qualifying” and wondered what that meant, and whether it is something that could benefit you.
You may have heard of the Personal Export Scheme and not realised that this is potentially a way to buy a vehicle without paying UK VAT.
Let Autoshippers take you through the process and give you some information on what this means.
What is a VAT Qualifying Vehicle?
For a vehicle to be VAT Qualifying it must either be new or have been pre-owned by a business and used for business purposes, only since new. The vehicle must not have ever been registered to a private individual at a private address, once this happens it may no longer be VAT Qualifying.
This is not only limited to cars, and also applies to motorbikes, motorhomes, caravans and commercial vehicles. The important thing to remember is that a vehicle can be deemed VAT Qualifying as long as it is new or has been registered to a business before you have purchased it.
The benefit for you is that there are some scenarios where someone purchasing a VAT Qualifying vehicle can do so without paying VAT. As I am sure you are aware, HM Revenue and Customs (HMRC) collect 20% tax on all UK goods and services (with few exceptions) This is known as Value Added Tax or VAT.
Where Autoshippers come into this equation, and are happy to help potentially save you money, is that one of the scenarios that enable a buyer to purchase a vehicle as VAT Qualifying is when it is being exported outside of the UK.
You need to be careful though, as this may mean that you are liable for taxes when you import the vehicle into your country of destination, so before you purchase a vehicle, please check the local Customs websites for clarification of the costs and procedures for duty/TAX on import.
There are other scenarios where a vehicle can be bought as VAT Qualifying, such as it is being used for business purposes, so if you are a taxi driver or a driving instructor you may be able to benefit from the scheme.
Surely, it’s a complicated process?
You’d think so, wouldn’t you?
The main things to remember are;
- Make sure that the vehicle is NOT REGISTERED to a UK address at any point as then it cannot be VAT Qualifying.
- Use a knowledgeable and dedicated car and motorbike shipping company, such as Autoshippers, who can provide you with the correct shipping paperwork.
Some UK dealers may ask you to cover the cost of the VAT, and return it to you once they have reclaimed it. There is a risk that this could result in you not getting your money back, and it can prove difficult to claim anything from the dealer after the fact. Others will handle the whole process without requiring payment of the VAT upfront. We would suggest speaking with the dealer before any money changes hands for details of the process that needs to be followed.
It is possible to reclaim the VAT yourself, you just need to present the correct documentation to HMRC. Along with the Bill of Sale/Invoice, you need proof of export, which Autoshippers will supply in the form of a Bill of Lading or Departure Notice, and the export Customs declaration. All documentation will need to be retained for at least 6 years by yourself and the seller, and Autoshippers will also keep copies on file.
This all needs to be done (including the export of your vehicle) within 3 months of full payment being made to the seller. If not exported and documentation not sent to HMRC within 3 months you will not be able to reclaim the VAT.
The Personal Export Scheme (PES)
Same thing? Not quite.
As with a VAT Qualifying vehicle, you can buy from a business that operates the Personal Export Scheme and, potentially, do so VAT-free if you are exporting it from the UK.
You can even use the vehicle in the UK for a limited period before you export it!
Yes, you are able to use the vehicle during the last 12 months of your stay in the UK if you are an overseas visitor, or 6 months before you leave if you are a UK resident. In fact, the vehicle can be driven by your wife, husband or civil partner (as long as the person who applied for PES is still in the country) and have permission. This even extends to chauffeurs!
But something to remember – if you are involved in an accident that results in your vehicle being a write-off, or it is stolen, the VAT will become due. So, make sure that your insurance covers the value of your vehicle including the VAT.
What is the process?
Firstly, you can only use the Personal Export Scheme if you are buying from a business which operates it, and will give you an invoice that does not include VAT.
They will give you either a VAT 410 (used) or VAX302 (new) application form which you need to complete and return to them, remembering to keep a copy.
The forms will confirm the date that you need to export from the UK, and when this happens you need to inform the DVLA. You will then receive a registration certificate which you will need to re-register in the country that you are exporting. If you don’t export, then the VAT will become payable. If not paid, you can lose your vehicle.
This scheme can be used by;
- Overseas visitors who have not been in the UK for either 365 days in the 2 years and 1,095 days in the 6 years, before the date of application. They must then stay outside of the UK with the vehicle for at least 6 months.
- UK residents who intend to leave, and stay outside the UK with the vehicle, for at least 6 months.
Something important to remember, which is different to VAT Qualifying vehicles, is that if you are buying a vehicle and intend to use the PES then you must make sure that you do so at a price that DOES NOT INCLUDE VAT. Once you have paid VAT you cannot reclaim it.
Exporting Your Car with Autoshippers
So, there you are. Play your cards right and you can potentially save yourself some money using either of these schemes. Just make sure that you use the services of a dedicated vehicle shipping company such as Autoshippers, who have been exporting vehicles for private individuals for over 20 years and are set up to provide you with all of the correct paperwork.
Or you check out some of the links below if you need clarification on anything discussed above;