VAT: Second-hand Motor Vehicle Export Refund Scheme

The measure

The government will legislate in the Finance Bill 2021-22 to enact the power for it able to introduce a scheme whereby businesses who buy used motor vehicles from Great Britain for resale in Northern Ireland or the EU may be able to claim a refund, following export, equivalent to the VAT paid. 

Currently, under the Northern Ireland Protocol, motor vehicle dealers in Northern Ireland may not use the VAT margin scheme on motor vehicles purchased in Great Britain. This means that they must account for VAT in full on sales of these vehicles, potentially increasing prices for consumers or increasing costs for businesses.


Who will be affected?

Businesses buying eligible used motor vehicles in Great Britain which are removed for resale to Northern Ireland or the EU.


When will the measure come into effect?

Assuming the power is indeed enacted, further legislation outlining the scheme in detail is expected to be released in 2022.

Our view

This announcement will be welcomed insofar as that it is intended to put businesses removing second-hand vehicles for sale in Northern Ireland or the EU on a level playing field with those businesses applying the VAT second-hand margin scheme elsewhere in the UK. Clearly the detailed legislation will need to be reviewed in detail once available.