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HMRC internal manual

VAT Margin Schemes

Second-hand vehicles: Importing cars

Imported cars are not eligible for sale under the margin scheme; and the normal rules for reclaiming input tax on cars apply when a second hand car is imported unless it meets the criteria for: 

  • returned goods relief (see Notice 702 VAT: Imports); or
  • classification as a collector’s piece (see IMPS05200).

The criteria for reclaiming VAT as input tax are set out in Notice 718.

The onward supply of an imported car on which a trader is unable to reclaim import VAT is exempt. This follows the European Court of Justice case in the Commission v Italian Republic (see VATMARG08050). A dealer buying such vehicles can use the margin scheme for the onward sale.

Further guidance on input tax matters relating to imported goods can be found in VIT.