VAT-Free Cars for Export

The Buyer

We sell cars free of UK VAT for export to buyers outside the UK, what HMRC calls an overseas person. For a car buyer, that means:

• Someone who is not resident in the UK.
• A business with no establishment in the UK from which it makes taxable supplies. A business like that can qualify even if it is registered for VAT here.

If you live in the UK and are moving abroad, the usual route is HMRC’s Personal Export Scheme, which also lets you use the car here before it goes.

The Car

HMRC’s export rules cover any motor vehicle, new or used, but there is only VAT to take off if the dealer charges VAT on the full price. The overview page, linked under Useful Links, explains which cars that applies to and what makes a used car VAT-qualifying. As a quick check:

• A new car: VAT on the full price, so it can all come off.
• A VAT-qualifying used car: VAT on the full price, so it can all come off in the same way.
• A car sold under the margin scheme: HMRC does not allow it to be zero-rated as an export, so there is nothing to take off. Example 3 below shows the figures.

The Seller

The dealer we buy the car from must be a VAT-registered business that charges VAT on its full price. A private seller adds no VAT to the price, so there is nothing to take off. We check the car’s VAT position before you commit.

We then sell the car to you. In a chain of sales HMRC lets only the sale to the overseas buyer be zero-rated, and that sale is ours: the dealer charges us VAT, which we recover through our VAT registration, and our invoice to you shows no UK VAT on the car.

If You Want to Drive the Car in the UK First

A car bought this way must not be used or delivered to you in the UK before it is exported. If you want to use it here before it goes, the route is HMRC’s Personal Export Scheme (VAT Notice 707), for overseas visitors and UK residents leaving the UK with the car. It has to be set up with a dealer that runs the scheme when you buy: HMRC does not refund the VAT on a car bought with VAT, even if it is exported later. Our Personal Export Scheme page, linked under Useful Links, explains the conditions and time limits.

UK VAT is 20% of the price before VAT, which is one sixth of a price that includes it. The prices below are round examples to show the arithmetic. They are not real prices.

Example 1: A New Car

A new car is priced at £30,000 including VAT. A sixth of that, £5,000, is VAT, so the price before VAT is £25,000. Sold to you free of VAT for export, the car costs £25,000, a saving of £5,000.

Example 2: A VAT-Qualifying Used Car

A VAT-qualifying used car is priced at £18,000 including VAT. The VAT is a sixth, £3,000, and the price before VAT is £15,000. Sold to you free of VAT for export, it costs £15,000, a saving of £3,000.

Example 3: A Margin-Scheme Car

A used car sold under the margin scheme is priced at £15,000. Suppose the dealer paid £12,000 for it. The dealer owes VAT only on its £3,000 margin, and that VAT is a sixth of the margin: £500. HMRC does not allow a margin-scheme car to be zero-rated as an export, so the car costs £15,000 whether it is exported or not. There is no saving, and only £500 of the price was VAT in the first place.

The saving is on UK VAT only. Import duty and taxes in your country are still due when the car arrives, and they are yours to pay as the importer.

We arrange the shipping ourselves, which HMRC calls a direct export. Our VAT-free sales are for buyers outside the UK, as above. For our sale to you to be zero-rated:

• The car must not be used or delivered in the UK before it leaves.
• The car must leave the UK within 3 months, and we must have proof of export within 3 months too.
• We must keep evidence of the sale as well as of the export, such as your order, our invoice and proof of payment.

When the 3 Months Start

Both limits run from the time of supply. In most cases that is the earlier of the day we send the car on its way to you and the day you pay us in full, so paying in full starts the clock even if the car is still waiting for its sailing. Under HMRC’s general tax point rules, an invoice issued or part of the price paid before then can start it earlier for that amount. That is why we plan the collection and the sailing before you pay anything towards the price.

Deposits

• You pay us £1,000 to secure the car, as on every car we source or buy for a customer. It is part of the price, not an extra fee. If you cancel, our terms and conditions say what is refunded.
• For VAT, the deposit is treated like the rest of the price. It is free of VAT if the sale is. If the car is not exported, or the proof does not arrive, VAT is due on the whole price, deposit included.

We have to be able to show HMRC a clear trail from our sale to you to the export. Taken together, the documents must identify us, you and the car, give the same value for it throughout, and show where it went, how and by which route. A vague or contradictory description or value is not acceptable.

Before the Car Is Shipped

• Your written order, giving your name and address and the address the car is going to.
• Our invoice to you, with no VAT on the car, showing the invoice number, your name and a full description of the car. The value on it must match the value on the export declaration.
• Proof that you have paid for the car.
• One government-issued photo ID and one utility bill showing your address, which we need for the customs entries and our anti-money-laundering checks, and to show that you live outside the UK.

After the Car Leaves the UK

We keep:

• The reference of the UK export declaration (its MRN or DUCR). Once the customs system confirms the car has departed, this is HMRC’s official evidence of export.
• The bill of lading or sea waybill, or the air waybill if the car goes by air.
• The collection and shipping details: the date the car left the dealer, the haulier, the registration of the collecting vehicle and the driver’s name and signature, the port it left from, the shipping line and sailing date, and the container number if it went by container.

We need them within the same 3 months, and HMRC requires us to keep them for 6 years.

If a condition is missed, our sale to you cannot be zero-rated and VAT is due on it: a sixth of the price. HMRC holds us, as the seller, responsible for paying it. Our terms and conditions say when that VAT is yours to pay.

• The car is used in the UK, or handed over to you here before it leaves. We sell cars VAT-free only as our own export, so either means our sale cannot be zero-rated. A car you want to drive here first has to go through the Personal Export Scheme, above.
• The car leaves late, or the proof arrives late. Once 3 months have passed from the time of supply, we must account for the VAT. If the car is later exported unused and we then get the proof, the sale can be zero-rated after all.
• The proof of export is missing or does not stand up. If the documents do not show the car leaving the UK in time, or the car, value or route on them do not match, we are liable for the VAT.
• The car is lost, stolen or destroyed in the UK before it leaves. Because we arrange the export, no VAT is due on the sale as long as there is evidence of the loss, such as an insurance claim or a police report.

That is why we agree the collection and sailing with you before you pay anything towards the car.

This is general guidance. HMRC’s VAT Notice 703, linked under Useful Links, sets out the rules in full.

You pay us for the car and for our part: finding the car if you need us to, buying it from the dealer, collecting it, making the export declaration, shipping it and keeping the proof of export. From collection until we hand the car to the port or carrier for loading, it is in our care and covered by our motor trade insurance.

Our standard price covers the UK side and the sea leg to your destination port. Air freight is quoted per job. Collection from the dealer at £1 per mile, marine insurance on container shipments, any pre-export inspection your country requires, and clearance, registration and delivery at your destination through a local agent are quoted separately. Import duty and taxes in your country are yours to pay as the importer. Where VAT applies to our charges, your quotation shows it.

A £1,000 deposit paid to us secures the car. It is part of the price, not an extra fee. The balance is due in cleared funds before the car is loaded. We accept bank transfer, which we prefer, and card payments up to £5,000, with no fee on personal debit or credit cards. We do not accept letters of credit, cheques, money orders or cash.