A U-turn on a VAT anomaly that was hitting used car dealers in Northern Ireland post-Brexit has been hailed as a victory for common sense.
Under the VAT Margin Scheme, dealers in Northern Ireland who bought a second-hand car in Great Britain for sale in the province paid VAT based on the profit made on reselling it rather than its full resale value.
That was all set to change at the beginning of January, after the end of the Brexit transition period, with the Northern Ireland Protocol removing the benefit.
It meant used car dealers in Northern Ireland being hit with an immediate 20 per cent rise in the sale price of the cars.
Automotive profitability experts ASE Global said that led to auction houses and others halting the sale of used cars to traders in Northern Ireland, as once the cars were bought, having to charge VAT to customers in Northern Ireland would mean the vehicles would be too expensive versus locally sourced ‘margin scheme’ cars.
However, after intense lobbying by businesses in Northern Ireland, HM Revenue & Customs has retrospectively changed the rules so that any used car bought by a dealer in Northern Ireland from January 1 will still qualify for the VAT scheme
Chris Cummings, head of professional services at ASE Global, said: ‘Common sense has prevailed.
‘The anomaly was perverse and the impact upon Northern Ireland consumers as well as Northern Ireland-based motor traders would have been grossly unfair.
‘Does this qualify as the first technical adjustment that HM Government has made post-Brexit?’
Michael Tomalin, chief executive of City Auction Group, which has centres in Belfast and Omagh, told Car Dealer today (Jan 15): ‘This can be considered a huge win for the Northern Ireland motor industry.
‘Motor dealers across the region are celebrating a late change to the new charges being implemented.
‘I would like to thank the National Association of Motor Auctions and all others who lobbied Parliament to ensure we gained this crucial change.’
He added: ‘The recent lockdown rules are effectively causing used car dealers enhanced pain with no option for click-and-collect to replicate England, making the opening period to 2021 very challenging to keep the wheels turning safely in accordance with government regulations.
‘Therefore, the VAT margin reversal is a huge assistance at this time, allowing the purchase of margin vehicles from the UK mainland to commence after the initial Brexit position financially stalled the option to purchase margin vehicles from the like of Rockingham and other suppliers.’