VAT margin scheme Northern Ireland and Ireland after Brexit
VAT margin scheme in Northern Ireland and Ireland after Brexit: buying margin cars from GB, the Windsor Framework rules and trading with EU dealers.
· 7 min read
The VAT margin scheme Northern Ireland dealers use follows EU rules for goods under the Windsor Framework: they can use it for cars bought in Northern Ireland or the EU, but not for cars bought in Great Britain. GB-sourced cars go through the Second-hand Motor Vehicle Payment Scheme instead, with VAT on the full resale price. Irish dealers cannot use the margin scheme on cars imported from GB at all.
What changed for the margin scheme after Brexit?
Brexit split the UK into two VAT areas for goods. Since 1 January 2021, Great Britain has been a third country for EU VAT and customs, while Northern Ireland has continued to apply EU VAT rules on goods. Trade between Ireland and Northern Ireland therefore follows intra-EU rules, while trade between Great Britain and either of them is import and export.
For the margin scheme this matters because Article 314 of the VAT Directive allows it only for second-hand goods supplied to the dealer "within the Community". A car bought in Great Britain is bought outside that area, so it cannot enter the EU margin scheme on the other side.
| Route | VAT treatment of a used car for a dealer |
|---|---|
| GB → GB | UK margin scheme possible |
| GB → NI | No margin scheme on resale; GB purchase may qualify for the payment scheme |
| NI → Ireland | Intra-EU rules: margin scheme or intra-community acquisition |
| Ireland → NI | Intra-EU rules |
| GB → Ireland | Import: customs formalities, import VAT, no margin scheme |
| EU → NI or Ireland | Intra-EU rules |
VAT margin scheme Northern Ireland: cars bought in Great Britain
No. HMRC's guidance on second-hand motor vehicles in Northern Ireland states that if you buy second-hand vehicles in Great Britain and move them to Northern Ireland, you will not be able to use a margin scheme when you resell them. Cars bought in Northern Ireland or from the EU can still be sold under the margin scheme.
Instead, since 1 May 2023 the Second-hand Motor Vehicle Payment Scheme (SHMVPS) lets VAT-registered businesses claim a VAT-related payment on eligible second-hand vehicles bought in GB and moved to NI for resale in NI or the EU. In HMRC's own example, a car bought in GB for £12,000 gives a payment of £2,000, the VAT fraction of one-sixth at the 20% rate. The repair costs are not included.
The catch is on resale: the NI dealer must account for VAT on the full selling price, not on the margin. On a car sold for £15,000, output VAT is £2,500, against the £2,000 payment on purchase; the net VAT cost equals one-sixth of the £3,000 difference, much like a margin scheme in effect.
Eligible GB purchases are cars bought from private individuals, businesses not registered for VAT, businesses that could not reclaim VAT on the vehicle, dealers who sold under the margin scheme, and some zero-rated Motability vehicles, according to the guidance summarised by Ireland's Revenue.
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Request accessHow does the margin scheme work in Ireland?
Ireland applies the EU margin scheme to second-hand cars bought within the EU, including Northern Ireland. Revenue's guidance lists four sources from which an Irish VAT-registered dealer may buy a margin car:
- a private individual;
- a business not registered for VAT;
- a business not entitled to reclaim input VAT on the vehicle;
- a VAT-registered dealer who sold the car under the margin scheme.
VAT on the margin is charged at the Irish standard rate of 23%. Vehicle Registration Tax comes on top for any car brought into the State; see VRT Ireland for how it is calculated.
Cars imported from Great Britain into Ireland
Cars bought in GB are imports. Revenue's guidance for VAT-registered dealers is explicit: customs duty may be due depending on the car's origin, import VAT is charged (and can be reclaimed or postponed under the usual rules), and on resale the dealer must charge VAT at the standard rate on the full selling price. Such cars "cannot be sold under the Margin Scheme as they were purchased outside the EU". Revenue adds that the margin scheme does not apply to vehicles that originate from GB and are imported via NI. Practical steps are in import car from UK to Ireland.
Irish dealers buying in GB may themselves be able to claim the UK SHMVPS payment, because the scheme is open to dealers registered for VAT in an EU member state, including NI, who export eligible cars from GB for resale.
Can margin cars be traded between Ireland and Northern Ireland?
Yes. Because Northern Ireland follows EU rules for goods, a margin car sold by a Belfast dealer to a Dublin dealer is treated like a sale between two EU member states. Revenue's guidance gives exactly this example: the Irish dealer pays NI VAT only on the NI dealer's margin through the price, cannot claim input VAT, and may resell under the Irish margin scheme.
Three conditions in practice:
- The car must really be an EU-status car. A vehicle that was in NI before 2021 or was imported into NI with a customs declaration is in free circulation. For cars bought from a dealer or private owner who imported them, Revenue requires the NI customs declaration; in some cases it accepts the NI V5C, service history and MOT history instead.
- The supplier must have applied the margin scheme, or bought the car from a private seller.
- VAT-qualifying cars from an NI business that reclaimed VAT go the other way: the Irish dealer self-accounts for VAT as an intra-community acquisition. See reverse charge on used cars.
NI businesses trading in goods with the EU use VAT numbers with the "XI" prefix, which can be checked in VIES like any EU number.
Trading with continental EU dealers
For dealers in Ireland and Northern Ireland, buying from Germany, the Netherlands or Belgium is ordinary intra-EU trade. A margin car stays a margin car, a VAT-qualifying car is bought net with self-accounted VAT, and young cars under six months or 6,000 km are taxed at destination. The rules are summarised in VAT margin scheme EU rules.
The practical differences are transport and right-hand drive demand. A left-hand-drive car sourced cheaply on the continent may sell slowly in Ireland, so the price comparison should be made against right-hand-drive stock in your own market. MyCarDealer compares a car's price with current listings in your own country and calculates the margin after VAT, transport and costs; you can try it on one car with the free valuation.
Frequently asked questions
Can a Northern Ireland dealer use the margin scheme on cars bought in Great Britain?
No. HMRC states that cars bought in GB and moved to NI cannot be resold under a margin scheme. The dealer may instead claim a payment under the Second-hand Motor Vehicle Payment Scheme and charges VAT on the full selling price.
How does the margin scheme work in Ireland?
Irish VAT-registered dealers can apply it to second-hand cars bought in the EU or NI from private individuals, unregistered businesses, businesses that could not reclaim VAT, or dealers who used the margin scheme. VAT is due at 23% on the margin.
Can margin cars be traded between Ireland and Northern Ireland?
Yes. NI follows EU VAT rules for goods, so margin cars move between NI and Ireland as between two EU countries. The Irish buyer needs proof that the car was properly imported into NI or was there before 2021.
What changed for the margin scheme after Brexit?
Great Britain became a third country, so cars bought there can no longer be sold under the EU margin scheme in Ireland or NI. NI dealers use the Second-hand Motor Vehicle Payment Scheme for GB-sourced cars, and Irish dealers pay import VAT and charge full VAT on resale.
Does the UK margin scheme still apply in Great Britain?
Yes. Dealers in Great Britain continue to use the UK margin scheme for eligible second-hand cars bought and sold within GB.