Northern Ireland's second-hand dealers fear EU VAT hike on British imports could ruin them

Increase on VAT for used cars exported from Britain to Northern Ireland is likely to have adverse impact on the trade here

Margaret Canning Twitter Email

January 13 2021 07:11 AM

Car dealers here are concerned their trade will be crippled by higher VAT for motors imported from Britain under the NI Protocol, as it will push up prices for the public.

There are around 600 local used car dealerships employing thousands of people. Many others also work in the trade, including in haulage firms who transport the vehicles over.

Ballymena dealer Malcolm Beattie is leading members of the trade here in lobbying politicians over the changes.

"This has come as a complete shock and it's really got dealers up in arms, as they can't afford to replace their stock. They don't know whether they're coming or going," he said.

"A lot of dealers have gone to their MPs and MLAs for help, and they've said they're looking into it and are aware.

"I understand there's Covid and they're up to their eyes, but this is going to put some car dealers out of business.

"The car market is one of biggest industries in NI and it's going to cripple it, and cripple it for retail customers. They will have to buy an older vehicle than what they anticipated for the budget they have."

Some suppliers in Britain have now halted sales across the Irish Sea.

Under the protocol, VAT at the usual 20% rate is being charged on the amount paid by a dealer for a car from Britain, rather than just the amount of profit they make from it, which had been the case before.

Mr Beattie said the costs will exert a heavy toll on dealers, some of whom import up to 90% of their cars from Britain.

Despite the lockdown, some dealers are still able to sell online.

It means that a dealer buying a model costing £10,000, which they would sell for £11,000, will be liable for £2,000 in VAT, instead of the £200 they would have to pay when being charged tax on the profit margin.

Mr Beattie said imports from Britain accounted for 80% of models he sold.

"Regardless of what value the car is, it's still going to affect the dealers. Anybody who has any common sense and saw this would surely to goodness think something's wrong here.

"What's really annoying, if a car goes from NI to GB, that charge doesn't apply.

"To me, it's discrimination against Northern Ireland, which is supposedly part of the UK."

The protocol means we are aligned to some EU VAT rules applying to traders moving goods to, from and within the province. That includes the second-hand margin scheme, which formerly enabled local dealers to pay VAT on the profit margin of second-hand cars.

But the EU rules only permit the scheme to be applied to second goods from within the EU VAT area, and Britain is no longer within that area.

That means the VAT margin rule does not apply to goods purchased in Britain since January 1 and then sold here.

However, the margin scheme still applies to stock bought in Britain during the transition period, even if it is not sold on until after the period.

A spokesman for HMRC, which is responsbile for the new customs regime, said: "The Government is aiming to minimise disruption for Northern Ireland traders and we are continuing to explore options to address the impact of the removal of the VAT margin scheme under the protocol."

Northern Ireland's second-hand dealers fear EU VAT hike on British imports could ruin them

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