Classic car vat and tax due, how much?
Discussion
The usual way is using the 'Margin Scheme' for second-hand goods (you probably have to inform HMRC you are using a scheme) -
You will pay 17.5% of your gross profit margin to HMRC; there is no apparent VAT charged to the purchaser.
But remember that is on the GROSS profit;
so if you buy an unrestored car for £1000 and sell it for £10,000, you pay VAT to HMRC on £9000 which = £1340.42.
The VAT amount is irrespective of your restoration costs (parts and labour you have paid others to do).
Profit for tax purposes is easier; in the case of the above figures it's £10,000, less £1000, less £1340.42, less your actual
costs on parts (if you have reclaimed the VAT on parts you then cannot use the recalimed VAT element as a cost ) and any labour costs paid to others.
If your business has no connection with the motor trade you would probably have done much better not purchasing anything to do with the car as a business input, not reclaiming any VAT at all, and selling it under CGT rules, which in the case of a car (a wasting asset) would be nil.
I'm NOT an accountant so don't take this as gospel.
You will pay 17.5% of your gross profit margin to HMRC; there is no apparent VAT charged to the purchaser.
But remember that is on the GROSS profit;
so if you buy an unrestored car for £1000 and sell it for £10,000, you pay VAT to HMRC on £9000 which = £1340.42.
The VAT amount is irrespective of your restoration costs (parts and labour you have paid others to do).
Profit for tax purposes is easier; in the case of the above figures it's £10,000, less £1000, less £1340.42, less your actual
costs on parts (if you have reclaimed the VAT on parts you then cannot use the recalimed VAT element as a cost ) and any labour costs paid to others.
If your business has no connection with the motor trade you would probably have done much better not purchasing anything to do with the car as a business input, not reclaiming any VAT at all, and selling it under CGT rules, which in the case of a car (a wasting asset) would be nil.
I'm NOT an accountant so don't take this as gospel.
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