Wouldn’t we all love to buy a car without paying VAT! What the average person doesn’t often know however is if you meet certain criteria you can.

An example of this is if you take your new car out the country within two months. In contrast, normally if you buy a vehicle to use in the UK you’ll have to pay a whopping 17.5% VAT on top of the asking price, not to mention road tax expenses.

The following guide will describe the circumstances and categories under which a car in the UK can be bought tax-free.  

Exporting Cars As An Ex-Patriot

British expats are spoiled for choice when it comes to buying a car in the UK and exporting it to their adopted home, this is becoming an increasingly popular thing to do as you’ll not need to pay VAT on the vehicle if you export it within two months of purchase. You can either arrange for your car to be delivered to your home country by your car dealership, or pay a visit to the UK to collect it yourself.

Be aware however that the rules for tax-free vehicles bought in this way can be complicated. Here are a few pit falls to watch out for when buying a car for export:

·         Make sure you actually qualify as not all expats do. It depends on your status and your adopted country. For example, you cannot own a car in Spain unless you have residency there.

·         Tax-free cars are not entirely exempt from all taxes or other possible charges. This is because the authorities in the destination countries will levy local taxes, their equivalent of VAT. There’s little point in getting out of paying 17.5 per cent VAT in Britain when the rate is higher than 17.5 per cent in the adopted country.

·         Depending on the country you’re exporting the car to; there may be additional fees to pay for entry. Many non-EU countries will make you pay import tax which may nullify your tax saving by choosing to export.

·         Do your research on the company that you’re buying from and make sure they’re reputable so that you don’t get lumbered with hidden costs.

·         If you’re exporting your car to a European country, it’s often a good idea to get a right hand drive model.

·         Be aware that currency fluctuations can affect how cost effective your tax saving is.

·         Know that UK registered cars can only be kept in an EU country for 12 months.

·         Be prepared in some cases for long waiting lists as certain companies may take up to six months to provide the tax-free vehicle you’ve chosen.

·         If in doubt, ask. It might be worth choosing a professional to help you buy and export your car. It can be a complicated business and you don’t want to end up making a potentially expensive mistake.

 

Forces Serving Abroad

Members of Her Majesty’s Forces (Air force, Army, Navy) serving abroad may be entitled to tax-free vehicles. If you’re a member of the forces and are stationed abroad, it’s worth contacting specialist companies who deal in tax exempt cars for military personnel. Some of these companies will even arrange finance for the purchase of the car.

Unfortunately this privilege only applies to those posted permanently overseas - short term postings do not qualify.

Foreign Diplomats

Diplomatic and consular staff are allowed in many cases to buy cars in the UK tax-free. Some car manufacturers offer superb deals to foreign diplomats who are stationed in the UK. For example, reliable Jaguar has a dedicated diplomatic sales section on their UK website which has some good offers. The criteria for diplomatic tax exempt qualification is laid down by the Foreign and Commonwealth Privilege Department, so visit their site to learn more.


Foreign Servicemen

If you’re posted to the UK from another country, you may be entitled to buy a vehicle free of VAT and road tax for the duration of your stay. The catch is that when you leave, you may need to pay the VAT if you don’t sell the car to another person who also qualifies for a tax-free car.


Conclusion
The above article demonstrates that there are indeed options to avoid paying UK VAT on car purchases. All in all, those who mainly qualify are ex-patriots living abroad who are entitled to export a car tax free, diplomatic sales, military personnel stationed abroad and foreign servicemen. For the rest of us unfortunately, VAT is a fact of life.

Author the Author: Stephen Gransville is a car enthusiast and independent adviser on diplomatic sales for vehicles.