Used car dealers in Northern Ireland face a major rise in costs whether or not a free trade deal is struck by the UK government for the end of the Brexit transition period.
It centres on the VAT Margin Scheme for cars that are moved between Great Britain and Northern Ireland.
The scheme lets second-hand car dealers pay VAT based on the profit they make on reselling a vehicle rather than its full resale value.
But under EU VAT rules as of January 1, 2021, the Northern Ireland Protocol as it currently stands will remove that benefit on used cars bought in Great Britain and sold in Northern Ireland.
It means used car dealers in the province will be landed with an immediate 20 per cent rise in the sale price on those cars.
The VAT Margin Scheme will still apply for second-hand cars bought and sold in Great Britain as well as within the whole of Ireland, though.
With just a few weeks to go before the transition period ends, HM Revenue and Customs is coming under increasing pressure over the anomaly and the severe impact that it could have on dealers in Northern Ireland.
MPs are also being contacted to lend their support.
Michael Tomalin, chief executive of City Auction Group, which has centres in Belfast and Omagh, told Car Dealer: ‘It’s really concerning that purchasing costs in Northern Ireland will rise if Boris Johnson doesn’t get the Brexit position resolved.
‘This is a major issue for dealers and buyer groups in Northern Ireland, as they’ll effectively be stopped from buying from auction houses in Great Britain.
‘It’s imperative that this is sorted out as a matter of urgency.
‘Northern Ireland’s used car trade shouldn’t be expected to try to shoulder the crippling costs it’ll be landed with if we lose the VAT Margin Scheme for cars bought in Great Britain and sold here.
‘I shudder to think what the effect will be on the used car retail industry in Northern Ireland if that turns out to be the case.
‘Why should we lose out when dealers and their customers in England, Scotland and Wales will be able to continue reaping the benefit of the scheme?’