Crosswords1 min ago
why certain used cars carry VAT?
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Further to Regulo's correct answer:
An item which is subject to VAT might pass through many hands before reaching a 'final' purchaser. For example, the manufacturer of a T-shirt might sell it to a distributor, who sells it to a wholesaler, who sells it to a store, who finally sells it to a customer. At each stage VAT is charged but everyone who has paid VAT can then reclaim it from HMRC, so it's the store's customer who ultimately pays into the Exchequer. Thereafter HMRC has no further interest in any sales of the T-shirt.
Cars which are sold to businesses also incur VAT at each stage along the chain of sales but, again, each purchaser can then reclaim the VAT. (So, when the car arrives at the final business purchaser, the Exchequer has still not received any net income from the succession of sales). HMRC won't get their money until the point at which the car is sold to a person or business which is not registered for VAT.
So it's always the first 'non-VAT registered' buyer, along a chain of sales, who actually pays into the Exchequer. Once HMRC have got their money, VAT ceases to be payable upon any future sales.
Chris
An item which is subject to VAT might pass through many hands before reaching a 'final' purchaser. For example, the manufacturer of a T-shirt might sell it to a distributor, who sells it to a wholesaler, who sells it to a store, who finally sells it to a customer. At each stage VAT is charged but everyone who has paid VAT can then reclaim it from HMRC, so it's the store's customer who ultimately pays into the Exchequer. Thereafter HMRC has no further interest in any sales of the T-shirt.
Cars which are sold to businesses also incur VAT at each stage along the chain of sales but, again, each purchaser can then reclaim the VAT. (So, when the car arrives at the final business purchaser, the Exchequer has still not received any net income from the succession of sales). HMRC won't get their money until the point at which the car is sold to a person or business which is not registered for VAT.
So it's always the first 'non-VAT registered' buyer, along a chain of sales, who actually pays into the Exchequer. Once HMRC have got their money, VAT ceases to be payable upon any future sales.
Chris
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