Q:
Hi
I’m new to this forum. Any advice would be gratefully received.
I am a private individual who recently bought, via a salvage auction website, a 7 year old 65000 km left hand drive Spanish registered car from South Yorkshire Police that they had previously seized under the Police Recovery Scheme. South Yorkshire Police sell all their seized vehicles via this site. Issues are:
1) I have been charged VAT at 20% on top of the purchase price;
2) The salvage company were simply storing the vehicle on behalf of S.Y. Police pending sale and were instructed to charge VAT by S.Y. Police;
3) The salvage company stores vehicles on behalf of other police forces and S.Y. Police are the only force that instruct them to charge VAT when taking payment;
4) The VAT has already been paid in another EU state – i.e. when the vehicle was bought new from the supplying dealer in Spain, and in view of this, how do I claim the VAT back that I’ve just paid?
I hope someone can help as it strikes me that S. Y. Police are using arbitrary rules to boost their coffers.
Regards,
A:
Hi
Unfortunately I don’t think that SY Police or anyone else following this practice are doing anything wrong – obviously i don’t know the exact details of the transactions involved and could not give definitive advice without such information. For example, I don’t know how the age of the vehicle and how long it’s been used in Spain before coming to the UK.
And I doubt it’s a case of SY Police boosting their coffers. If they’re charging VAT on the sale of anything, they have to pay it to HMRC like any other “business”. They don’t get to keep the VAT just because they’re a police force.
BUT this is what I think is happening. You have to pay VAT on the purchase of most new vehicles in other EC countries, unless it’s going to be exported to the UK within 6 months & has been used for less than 6,000 km See the rules here http://www.hmrc.gov.uk/vat/sectors/consumers/personal-vehicles.htm. And in this case, you’d have to pay full UK VAT on entry to the UK.
Assuming it’s an older vehicle then I’m not aware of any way of recovering the Spanish VAT, but the way I understand it, no VAT would have been paid when the car was brought into the UK.
Sales of second hand cars are usually VAT free in the UK UNLESS AND TO THE EXTENT THAT ANY PROFIT IS MADE OVER THE PURCHASE PRICE PAID BY THE SELLER.
ANY VAT CHARGED HAS TO BE PAID TO HMRC.
In your case, the seller is SY Police and as they haven’t paid anything for the purchase of the car, they have to pay HMRC VAT on the amount they get for the sale. So as long as they pay the VAT that you’ve been charged to HMRC, then as far as I can see, they are treating teh transaction correctly for VAT purposes.
Normally, sellers calculate their VAT on a cash inclusive value, ie say you pay £1,000, they’d calculate the VAT as £1,000 x1/6, i.e. £166.66 and I guess that this is what the other vendors are doing. But I don’t think that there is anything to stop them quoting a price then adding the VAT on top, ie £1,000 plus 20%, i.e. £200.
So it seems unlikely to me that you’d be able to recover the VAT charged either in Spain or here in the UK.
Marie
Q:
Hi Marie
Thanks for your reply – it’s much appreciated. Just wanted to clarify a few things you’ve raised.
According to the VIC Check (Spain’s HPi Check), the vehicle I bought was supplied new in Spain in August 2005. It was seized in Doncaster in 2007 by S.Y. Police as it was being used for drug running from Malaga. Therefore, it had been used in Spain for 2 years.
The offender was jailed for 9.5 years in January 2011 and was the second owner of my vehicle. His collection of antiques bought from the proceeds of drug dealing was auctioned off in Sheffield in January 2011 (as reported in the national press). The car I’ve bought has been sitting in a police compound from 2007 until October 2011, and was therefore 2 years old and had 65000kms on the clock in 2007 as it’s not been anywhere in the meantime.
Issues are then:
1) VAT was not charged on top of the bid prices of the antiques – I don’t see any antique buyers wearing the imposition of VAT on top of any bid price – it just doesn’t happen;
2) It would be impossible to say whether VAT has ever been paid on the antiques by various owners of those items over the years;
3) In the case of the antiques in 1) and 2), it’s safe to say that VAT has never been paid on some of these items;
4) Spanish IVA (VAT) was definitely paid by the first owner to the supplying dealer when the vehicle was bought new;
5) I’ve also paid VAT on a non-commercial vehicle i.e a 6 year old car with 65000kms here in the UK;
6) The obvious question is, why are some items treated as not attracting VAT at all as in 1) and 2), whereas other items attract VAT twice as in 4) and 5) when it can be proved VAT has already been paid in the form of Spanish IVA?;
7) One point of EU membership is that where VAT is paid in one member state, it does not have to be paid in another one. I’m not aiming to claim the VAT the first owner paid in Spain – I’m wanting to reclaim UK VAT;
8) S.Y. Police seem to be applying a ‘VAT qualifying’ policy to vehicles of an age and mileage that just don’t come within the realms of ‘VAT qualifying’ vehicles i.e over 6 months old, over 6000kms, not classed as commercial vehicles which are always advertised as +VAT, and, where the VAT has already been paid;
9) It appears that the fact that VAT (in the form of Spanish IVA) has been paid already is being ignored;
10) Charging VAT on top in some auctions and not in others which are all open to the public appears arbitrary and discriminatory against the private individual as they can’t claim the VAT back whereas businesses can. If S.Y. Police want to get into the realms of VAT, and as such, play at being a normal business, they should pay it to HMRC out of their margin like normal businesses do – S.Y. Police didn’t pay anything for the vehicle so it’s all profit + VAT!
Sorry for the long list but this situation just does not sit right somehow.
Regards,
A:
Hi
I’m not sure that I can say anything else that will be very useful in this situation simply because it would take me a long time to consider all of the points in your latest post and look into all of the VAT aspects!
However there is one point here that I think is worth bearing in mind. You rightly made the point that it’s difficult to know whether or not VAT has been charged on the sale of any second-hand item, whether it be antique, cars, works of art etc. The whole point about the second-hand scheme is that it exists to remove the inequity that would apply if VAT is charged on the same item which has previously been owned by a non-registered person; i.e. a member of the public who cannot recover the VAT. Of course, the way this scheme works means that the revenue does benefit from the VAT that has to be paid on the profit margin; but this would always be significantly lower than charging VAT on the full selling price. So it least it means that the sale of second-hand goods previously owned by people who are not registered for VAT do not fall fully within the VAT net.
Normally, VAT is calculated on the sellers margin by treating it as a VAT inclusive figure. In other words if the profit is £100, the VAT is calculated at 100 divided by six which comes to £16.66, rather than £20 if it were charged on the basis that the margin is exclusive of VAT. It sounds to me as though South Yorkshire police may be making the calculation on the VAT exclusive basis rather than the correct basis which would normally be on the VAT inclusive basis.
You don’t normally see VAT charged on the VAT inclusive basis because of the way auctioneers and sellers of second-hand goods do their invoicing for VAT purposes. There are specific rules that require them to set out the invoices in a particular way (that are explained in the VAT notice) so that normally, purchasers cannot see how much VAT they have been charged other than the fact that it has been included on the profit margin. That is why you would never know whether VAT is charged on the sale of antiques receipt.
Based on this, it sounds to me as though South Yorkshire police could have calculated VAT on the VAT inclusive value rather than charge it on top of the full value. But unfortunately, without talking to South Yorkshire police I simply don’t know why they’ve done this. Of course, you could write to their accounts department or you could try writing to the local VAT office to ask them to look into the issue on your behalf.
I’d be happy to look into this on a formal basis for you, but I suspect that you wouldn’t want to incur the cost of this, especially if in the end I simply end up confirming that South Yorkshire police are correctly charging VAT and that there is no way for you to recover any of the VAT paid on the original selling price in Spain. I do charge a lower hourly rate for private individuals, but it would take me a long time to look into this properly and that would probably mean a minimum fee of around £200 £300 plus VAT.
If I were in your position, I would try writing to the SYP accounts department and/or local VAT office to see if you can get them to look into the issue for you.
Marie