How does the VAT margin scheme work for used cars in Ireland?
Under the margin scheme a dealer pays VAT only on the difference between what the car sold for and what it was bought for, not on the full selling price. The margin is treated as VAT-inclusive, so at the 23% standard rate the VAT is the margin × 23 / 123: a car bought for €10,000 and sold for €12,000 has a €2,000 margin and €373.98 VAT. It only applies to cars bought in the EU from someone who could not charge VAT on them (a private seller, a business that could not reclaim VAT on the car, or another dealer selling under the margin scheme). Cars bought in Great Britain are taxed in full on resale.
Which cars qualify
Revenue's guidance on second-hand goods lists the sources. A car can be sold under the margin scheme when the dealer bought it, in Ireland or another EU country, from:
- a private individual;
- a business that was not entitled to reclaim VAT on the car, or a VAT-exempt body such as a bank or insurer;
- another dealer who sold it to you under the margin scheme (their invoice shows no VAT and carries the margin scheme endorsement);
- an insurance company that took the car in settlement of a claim from someone who could not reclaim VAT on it.
Which cars do not qualify
- Cars bought with a VAT invoice from a VAT-registered business that reclaimed the VAT. These are sold under normal VAT rules: 23% on the full selling price, with the purchase VAT reclaimed.
- Cars bought in Great Britain and imported. The dealer accounts for VAT at import (usually through postponed accounting, deducted at the same time) and charges 23% on the full selling price, excluding VRT, when the car is sold. Revenue's page on importing vehicles from GB and Northern Ireland sets this out.
- New cars. A car that is still a "new means of transport" for VAT purposes does not go through the margin scheme.
- A car bought from a business that could reclaim only part of the VAT on it.
Working out the VAT
Take the selling price, subtract the purchase price, and multiply the result by 23 / 123. Revenue's own example is a €500 sale less a €300 purchase: €200 × 23 / 123 = €37.40. The same sum on a car bought for €10,000 and sold for €12,000 gives €373.98 of VAT, so the dealer keeps €1,626.02 of the €2,000 margin before costs.
Repairs, valeting, parts, advertising and overheads do not reduce the margin. A car bought for €10,000 that needs €800 of work and sells for €12,000 still has a €2,000 margin for VAT. Those costs reduce your profit, not your VAT.
If a car sells for less than you paid, the margin is nil and no VAT is due on it. The loss is not refunded and cannot be set against the margin on other cars. Each car stands on its own.
Invoices and records
A margin scheme invoice must not show VAT as a separate amount, and Revenue says it should carry the endorsement "Margin Scheme - this invoice does not give the right to an input credit of VAT". You also cannot reclaim any VAT included in the purchase price of a margin scheme car.
Keep the purchase and sale records for each car together: who you bought it from and whether they could charge VAT, the purchase price, the sale price and the invoice. That is what shows the car qualified if Revenue asks.
The scheme is optional per sale. If a VAT-registered business customer needs a full VAT invoice to reclaim the VAT, you can sell that car under normal rules instead: 23% on the full price, shown on the invoice. You still cannot reclaim VAT on the purchase.
How 10X Dealership handles it
In 10X Dealership each car records how it was bought: under the margin scheme or with VAT. The invoice follows that choice, so a margin car cannot be invoiced with VAT shown and a VAT-qualifying car cannot slip onto the margin scheme by mistake. Where a car came in through an import without that detail, the person issuing the invoice chooses, and the choice is saved on the car. Profit on every screen is shown after VAT, worked out the way described above, including the nil margin on a loss.
This guide explains the general rules for VAT-registered dealers in Ireland. It is not tax advice for a specific transaction; check unusual cases, such as cars from Northern Ireland or company vehicles, with your accountant.
Related questions
Can I deduct the cost of repairs from the margin?
No. Revenue's guidance says the margin is the selling price less the purchase price and is not reduced by repairs, accessories or overheads. Those costs lower your profit, not the VAT.
What happens if I sell a car at a loss under the margin scheme?
The margin is treated as nil, so no VAT is due on that car. You do not get a refund, and the loss cannot be offset against the margin on other cars.
Can a car I imported from the UK go on the margin scheme?
Not if it was bought in Great Britain. Import VAT is accounted for when it comes in, and when you sell it you charge 23% on the full selling price, excluding VRT. Cars bought from private sellers or margin scheme dealers in EU countries can still go on the scheme.
Does the invoice have to say margin scheme?
Yes. The invoice must not show VAT separately and should state that it is a margin scheme invoice that does not give the right to an input credit of VAT.
