The caravan market is as bonkers as ever.

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Nov 6, 2005
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VAT is only payable on the difference in value a business creates ultimately , so that is always on the profit margin but its always based on the net price of the transaction. Functionally VAT is always calculated on the net value of a transaction so when buying goods VAT is accounted on the purchase, And when they sell the VAT is also calculated on the net value., but the payment the business makes to the HMRC is the difference between purchase and sales VAT.

When it comes to retail sales the VAT is always calculated on the net value of the sale. - not on the profit margin,
That's the situation when the seller is VAT-registered - in the case of a caravan, or car, trade-in the seller isn't normally VAT-registered.
 
May 3, 2021
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I was looking at the VAT aspect as an explanation for the large hike in price.

If you believe this “expert” there seems to be two ways of accounting for VAT. Any accountants out there😵‍💫😵‍💫

Margaret Stone, the Daily Mail's Money Doctor, replies: There are two ways in which motor dealers handle VAT on used vehicles. Some charge VAT only on the profit they make on the sale of the car. This is known as the second-hand margin scheme, used by most car dealers.

Alternatively, they can charge VAT on the total transaction cost - that is the second-hand selling price achieved. It depends on how they choose to keep their records.

The second-hand margin scheme requires more paperwork-from the dealer. He must, for example, keep the relevant stock books which include details such as the car's engine number.

Each method of charging VAT is legal, and HMRC is concerned only that the dealer tells them which scheme he is using.

There is no obligation for the dealer to tell the customer at the outset which method of charging VAT will be used. Nor is there a legal right for the customer to know, or be told, how much of the price comprises VAT.

Yet as VAT on the full purchase price is likely to be rather more than VAT on the dealer's profit on the transaction, it seems to me worth asking which method of charging VAT a car dealer uses before deciding to buy..
OK, let’s take that the Daily Mail's Money Doctor as gospel.

So, dealer A chooses “the total transaction cost” scheme. If he buys a car from a VAT-un-registerd private seller he will need to apply VAT to the final selling price. The final selling price will either be inflated when compared to the fair market price, or the dealer has to reduce his margin. My conclusion – dealer A will not buy from a private seller. Dealer A will buy a secondhand car from another dealer who is VAT registered and then sell it onwards to a private buyer – with the VAT being paid on the net difference between selling price and purchase price (less any VAT paid on input sundries that support the dealer’s value-add). IMO, that is the business model that “the total transaction cost” is designed for.

Conversely, dealer B chooses the “second-hand margin” scheme. Dealer B can buy a secondhand car from a private individual and only has to apply VAT on the profit between sale and purchase price (less any VAT paid on input sundries that support the dealer’s value-add).

So – dealer A always sources his cars from another business, and can sell to a private buyer or to another business. Dealer B can source from either another business or from a private seller, and can sell to a private buyer or to another business.
 
May 7, 2012
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That's the situation when the seller is VAT-registered - in the case of a caravan, or car, trade-in the seller isn't normally VAT-registered.
I think you have got a bit confused. The VAT is charged by the dealer on the sale of the caravan he has taken in part exchange.
 

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