Auto Traders

MGT Chartered Accountants provide automotive accounting services for many businesses in the region, covering most of the major franchise groups and independent car dealers.

Local knowledge and the ability to access national expertise through our BCA network gives our specialist motor retail team a distinct advantage over our competitors.

With our understanding of the challenges facing the motor retail sector, we can help identify tax savings, profit improvements and strategic opportunities. Our range of car dealership accounting services also includes help with succession and property issues.

VAT Margin Scheme calculations for Motor Traders
Marging scheme is only available for second hand good such as second hand cars.

Calculate your selling price
Your selling price is everything which you are to receive for the vehicle, whether from the buyer or a third party. It includes:

  • incidental expenses directly linked to the sale, for example, where you have had to pay for an MOT to make the vehicle saleable
  • accessories fitted prior to the sale
  • Disbursements do not form part of the selling price, these should be accounted for separately outside the Margin Scheme. Section 9 contains information on how you should treat linked insurance products and warranties.

The consideration you receive may not be wholly in money.

Calculate your purchase price
Your purchase price is everything which you had to pay for the vehicle.

You must not include any cost to you of bringing the vehicle to sale. Your purchase price does not include the cost of any repairs, refurbishment, accessories or your business overheads.

For example, if you purchase new parts and fit them to a car, you must not add the cost of those parts to the purchase price of the car. You must use the original price you paid for the car when you calculate the margin for the purposes of the scheme.

The Margin Scheme taxes the difference between what you paid for the vehicle and what you sold it for, not the overall profit you have made on it.

Calculate the margin
Under the Margin Scheme, you only have to account for VAT when you sell a vehicle for more than you paid for it.

To work out the VAT due on an individual sale, follow the steps in the example:
TermAmount
(a) Purchase price£1,500.00
(b) Selling price£2,000.00
(c) Gross margin (b - a)£500.00
(d) VAT payable (c × 1/6)£83.33

A standard rate of VAT of 20% gives a ‘VAT fraction’ of 1/6. When you have worked out your gross margin, multiply the figure by 1, then divide by 6.

VAT Margin Scheme and Making Tax Digital (MTD)
Currently businesses using VAT margin scheme are exempt from MTD and hence those businesses are currently not required to report under MTD guidelines after 1 April 2019. This might change in future.

At MGT Chartered Accountants, we give advice and support on deal strategy and execution of all mergers and acquisitions activity. This includes:
  • Sell side advisory, purchaser identification and grooming the business for an exit
  • Due diligence
  • Valuation and purchase price negotiation and agreement
  • Applicability of VAT Margin Scheme
  • FCA Regulation Monitoring for finance related activities