13 January 2021

Used car prices in Northern Ireland have been saved from a post-Brexit VAT-related costs-hike after HMRC and the Treasury agreed to reinstate a margin scheme.

The move comes after lobbying from the NFDA. “It is extremely positive that the Government has confirmed HMT and HMRC will reinstate a margin scheme which will avoid an immediate price increase for thousands of second-hand vehicles and the resulting detrimental impact on dealerships and consumers in Northern Ireland as well as Great Britain,” said NFDA chief executive Sue Robinson.

The margin scheme means both those selling used cars in Northern Ireland and those selling to retailers in Northern Ireland will no longer face a hike in prices.

Margin schemes enable traders of used goods, such as vehicles, to pay VAT based on the profit earned from the resale of those goods, rather than the entire value of the good. This benefits consumers as it makes used cars more affordable, as the amount of VAT they pay is far smaller compared to the 20% they would pay for a new vehicle.

However, if the current rules had been left unamended, as part of the Northern Ireland Protocol, motor traders in NI would have been unable to access VAT margin schemes for used vehicles they sell which are sourced from GB. NFDA has repeatedly stressed that this would have been a major disincentive for NI dealerships to buy used vehicle stock in GB, as it would have led to an immediate 20% increase to the sale price of these vehicles.

According to the NFDA, MP Michael Gove confirmed: “HMT and HMRC will reinstate a margin scheme to ensure that NI customers need pay no more than those in any other part of the United Kingdom.”

Sue Robinson, NFDA Chief Executive, added: “While we welcome today’s announcement, we urge the Government to establish as soon as possible a system allowing dealers to backdate margin scheme claims.”

Tags: NFDA, Northern Ireland, used cars, VAT