Wednesday, 13 May 2009
Dáil Eireann Debate
Minister for Finance (Deputy Brian Lenihan): As the Deputy will be aware the Supplementary Budget announced that a Margin Scheme for second-hand cars was being introduced, with effect from 1 July 2009, whereby dealers would be taxed for VAT purposes on their margin in regard to second-hand cars they acquire and resold after that date. The margin is the difference between the price the dealer purchased and resold the second-hand car for. In conjunction with the introduction of the Margin Scheme, special transitional arrangements were being put in place regarding second-hand cars in stock on the introduction of the Scheme.
The Margin Scheme would replace the existing Special Scheme for second-hand cars under which dealers/garages are entitled to immediate input credit for the residual VAT included in the price of a second-hand car acquired either through purchase or trade-in. Under the Special Scheme dealers, when they resell the car, are required to repay this VAT input credit or VAT based on the resale price of the car, whichever is the greater.
Since the Supplementary Budget further discussions have taken place with the motor industry concerning the proposed introduction of a VAT Margin Scheme for second-hand cars. While SIMI expressed appreciation at the efforts made by the Government to try to assist the industry, they considered, in view especially of the difficult financing situation facing the industry, that on balance it would not be in its overall best interest for the Margin Scheme to be introduced at this time. Consequently, the proposed Margin Scheme and transitional arrangements regarding existing stock of second-hand cars is not now being introduced.
It has, however, been agreed that there will be ongoing dialogue over the coming months with SIMI as to what other measures might be introduced to assist the motor industry, especially in regard to removing the current stock of second-hand cars held by dealers.
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