Vehicle scrappage VAT issues within the Motor Trade

The vehicle scrapping scheme which we campaigned for to kick start new car sales within the Motor Trade, is faultering in the early stages due to confusion over the amount of VAT being applied.

This confusion relates to the amount of VAT due to HM Revenue & Customs. The full amount of VAT will be due from the dealer for the undiscounted sale price of the vehicle. The governments £1,000 contribution passes through the car dealer with no VAT consequences, however manufacturers and dealers must charge the VAT on the vehicle price - before the scrappage scheme discount. This means that the government contribution actually costs them less than £900 once the VAT is reclaimed through motor traders and dealer networks.

Motor Traders and manufacturers need to fully understand the implications of the scheme, or this could result in them being seriously out of pocket. Another way to help the hard pressed trader is a motor trade insurance quote from iQuote Insurance, our specialist advisors will save you money on your motor trade policy.