Scrap VAT clarified
May 19th, 2009 by Richard Aucock
GUIDANCE from HMRC over how to handle scrappage VAT payments has finally been published…
… at last resolving the issue for car dealers.
In short, it is as thus:
Car dealers can reclaim VAT on FULL SELLING PRICE of car
This means that car dealers SHOULD NOT reduce the amount of output VAT declared on the sales invoice.
As Michelle Malone from VAT experts ASE explained, ‘the scrappage subsidy only reduces the amount of consideration that is received directly from the customer, not the selling price for the vehicle.
‘This suggests that the scrappage subsidy should be shown in the settlement part of the invoice, rather than the main body.’
For the poor car manufacturers, things are much more complicated.
In short, she says, ‘manufacturers should not alter their VAT invoicing procedures for vehicles purchased from them by dealers, as the VAT chargeable on these vehicles remains unchanged by the scrappage scheme.
‘Manufacturers are, however, entitled to reduce the amount of output VAT they declare to HMRC overall.
‘In effect, they can offset the VAT included within the £1000 scrappage subsidy that they must contribute to the scheme.
‘This amounts to a reduction of £130 of VAT per car sold under the scheme.’
Still confused? Don’t be. That’s for your car maker to worry about.
For car dealers, the VAT situation is unchanged… so sell on in freedom!
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