Ireland: Purchase and resale of second-hand cars does not meet conditions under VAT margin scheme

A Tax Appeal Commission (TAC) determination (124TACD2023, published on 29 September 2023), dismissed a taxpayer’s appeal that sought to treat the purchase and resale of second-hand cars, as coming under the value added tax (VAT) margin scheme. 

The taxpayer specialised in the importation and sale of high-end second-hand cars. The cars were primarily sourced from two suppliers, one located in England and the other located in Northern Ireland. The case concerned transactions that took place before Brexit and were therefore subject to EU VAT rules.

During an audit, Revenue found that the cars acquired from one supplier were treated as intra-community acquisitions of goods on which the taxpayer accounted for reverse charge Irish VAT. However, most cars purchased from the other supplier were treated as margin scheme goods, with the appellant accounting for VAT on the margin, being the difference between the purchase price and the sales price of the vehicles, when they resold the car.

Revenue noted that none of the purchase invoices included the wording “margin scheme” and that some of the invoices quoted the VAT registration number of the appellant. Accordingly, Revenue took the view that the conditions to avail of the margin scheme were not fulfilled.

The Commissioner determined that Irish VAT would apply on the full resale of price of the car rather than only the profit margin. The Commissioner concluded that the appellant did not discharge the necessary burden of proof to establish that it was entitled to apply the margin scheme to the acquisition and resale of the vehicles. In reaching this decision, the Commissioner noted that the appellant did not take “every reasonable step that could be required” to establish that the appellant’s transactions were eligible for the margin scheme.

Read a November 2023 report prepared by the KPMG member firm in Ireland