Margin VAT scheme Calculation

Dear Sir/Madam, I would like some assistance on this query on calculating the margin used to work out the VAT. The company purchases second-hand vehicles from an auction website. These vehicles are then leased/rented for a period of up to 12 months to companies, schools and universities and used for research purposes. Once they are finished with the vehicles, they are returned to the company and then sold through the same auction website. No changes are made to the vehicles, they are just listed for sale in the same condition in which they are received. If these vehicles are returned damaged and has to be categorized as a Cat A or B vehicle, then Margin VAT is not considered. Where they are returned in the same/similar condition that they were leased/rented as, Margin VAT is calculated on the sale of the vehicle. The margin VAT calculation is being considered as Purchase price (this being the cost that the vehicle was acquired for when it was initially purchased from the auction site) and Selling price ( this being the sales proceed received when the vehicle is relisted on the auction site and sold after being returned to the company). Is it correct to be using the Purchase price as the cost that was paid to acquire the vehicle initially? Is this the correct Purchase price to be used in calculating the margin, when the vehicle is sold up to 12 months later after being used for another purpose? I am concerned that this may not be correct and I could not find any guidance notes to support or refute this. Can you please let me know. Thank you

Hi,

When calculating the margin scheme the correct purchase price is required in order to calculate the margin and hence the VAT to account for. The purchase price is initially what you pay for the vehicle regardless of the time between the purchase and sale of the vehicle. You  can see guidance here:

Using the VAT margin scheme for second-hand vehicles

Thank you.