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Updated: UK Government reinstates VAT margin scheme for NI used car dealers

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The UK Government has confirmed that it is reinstating the VAT margin scheme for cars imported and resold by car retailers in Northern Ireland – avoiding pressure on dealer margins and price increases for customers.

Sue Robinson, chief executive of the National Franchised Dealers Association (NFDA) celebrated the action, announced by Michael Gove MP this lunch time, but said that efforts were still being made to ensure that the change would be back-dated to avoid impediment to affected businesses.

"Following our significant lobbying efforts, 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 Robinson.

“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.

“We look forward to continuing to work closely with the relevant Government departments to provide feedback on the issue on behalf of franchised dealers.”

The NFDA had previously written to HMRC and a number of MPs to highlight that under post-Brexit EU VAT rules, the sale price of a significant proportion of used vehicles in Northern Ireland (NI) would have been subject to a 20% increase for stock purchased in Great Britain (GB).

Lookers, TrustFord and Sytner were among the AM100 car retail businesses that had also lobbied MPs on the issue - a result of Brexit and NI's continued place within the EU's customs union.

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.

The NFDA said that it had 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.

Today, Rt Hon Michael Gove MP 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”.

Paul Ward, director, Shelbourne Motors, told AM: “We are delighted with the support from the local representatives who have lobbied on our behalf of all Northern Ireland dealers with the treasury.

“This is great news for the NI consumers and dealers alike and is very welcome in these challenging times.”

Glyn Edwards, from MHA MacIntyre Hudson, said: “Along with the NFDA we worked hard to publicise this issue which would have added 20% to the price of used cars in Northern Ireland and would have had an impact on the ability of GB dealers to sell competitively to NI. We are really pleased to see that the government responded quickly to the inequity.

However, Edwards, suggested that issues would remain with the used car market across the Irish sea.

He said: “The devil will be in the details...the EU may wonder how they stop used cars entering the Republic of Ireland from Great Britain via Northern Ireland.

“The issue of VAT and duty as used cars enter Ireland remains a live one and may not be so easily fixed.”

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  • philip william alexander GALBRAITH - 13/02/2021 12:05

    Does this amendment also apply to an individual purchasing a car in GB and bringing over to N.I. where the individual is resident in N.I.