Motor trades
Accountants for Car Dealers, Used and Franchised
Motor Trade Accounting offers specialist accounting support for used and franchised car dealers across the UK. Get help with the Margin Scheme, stock, finance commission and the figures that tell you which cars actually made money.
Specialist accounting for the way dealers buy and sell
Selling cars looks simple on paper: buy a vehicle, prepare it, sell it for more. In practice every car carries its own VAT treatment, its own preparation costs and sometimes its own finance arrangement, and a dealership with a few dozen units on the forecourt can have a surprising amount of money tied up in stock. A specialist motor trade accountant works car by car, so profit is measured on each sale rather than guessed at the year end.
Used car dealers rely heavily on the VAT Margin Scheme, which only works if the stock book and paperwork are kept to HMRC’s standard. Franchised dealers have a different set of questions, including manufacturer bonuses, demonstrator vehicles, pre-registrations and floor-plan finance. Both need an accountant who knows where the traps are.
Many dealers also arrange finance for customers. That brings regulation by the Financial Conduct Authority, commission income to account for and records that need to be kept carefully, particularly given the FCA’s recent attention to historic motor finance commission.
What specialist support for a dealer can include
Support is shaped around the size of your forecourt and whether you sell used, new or both.
- Margin Scheme VATChecking that each car qualifies, that the stock book holds the details HMRC requires and that VAT is worked out correctly on the margin.
- Stock control and valuationReconciling your stock list with the books and valuing unsold cars at the lower of cost and net realisable value at the year end.
- Per-vehicle profit reportingProfit on each car after preparation, add-on products, transport and finance costs, so you can see which buying decisions pay.
- Stocking financeRecording floor-plan or stocking loans, interest and repayments correctly, and tracking how long stock sits before it sells.
- Finance and add-on incomeAccounting for commission from finance providers and income from add-on products, with records that support your FCA obligations.
- Manufacturer bonuses and demonstratorsFor franchised dealers, the correct VAT and accounting treatment of bonuses, registration support and demonstrator cars.
- Year-end accounts and taxAnnual accounts, corporation tax or self assessment, and planning ahead of the year end so tax bills are not a surprise.
What to plan before you get started
These are the areas worth sorting out before your first conversation.
Your stock book
Have your current stock book or dealer management system export to hand, showing purchase and sale details for each vehicle.
How you buy your cars
Auctions, part-exchanges, private sellers and trade buys can each carry different VAT treatment, so note roughly how your stock is sourced.
Any finance arrangements
List the lenders you introduce customers to, how you are authorised by the FCA and how commission is paid to you.
Trade plates and insurance
Note the trade plates you hold from the DVLA and your motor trade insurance, as both have costs and conditions your accounts should reflect.
Good to know if you sell cars
Not every car can go through the Margin Scheme
A car bought with VAT shown separately on the invoice cannot normally be sold under the scheme. Getting this wrong on one car means VAT on the full selling price.
Losses on one car do not reduce VAT on another
Under the Margin Scheme a car sold at a loss has no VAT due, but that loss cannot be set against the margin on other cars. Global accounting is not available for vehicles.
Input VAT on cars for resale
Cars bought as stock to sell can have their VAT reclaimed when VAT is charged, which is different from cars used by the business or its staff.
Finance commission records matter
If you broker finance, keep clear records of the commission you receive and how it was disclosed. Take compliance advice on FCA rules alongside your accounts.
How it works
- 1
Send an enquiry
Tell us whether you sell used, new or both, roughly how much stock you carry and where you need help.
- 2
Talk to a specialist
A dealer-focused accountant arranges a call to look at your stock records, VAT position and reporting.
- 3
Review and proposal
You receive a clear outline of the work, including any Margin Scheme or stock record fixes that should come first.
- 4
Ongoing support
Monthly or quarterly figures, VAT returns and year-end work follow, with a named contact for questions.
Questions car dealers ask
Do I have to use the VAT Margin Scheme?
No, it is optional, but for qualifying used cars it usually means VAT is due only on your margin rather than the full price. You must keep the records HMRC sets out.
What has to be in my stock book?
HMRC expects details such as the stock number, registration, purchase and selling price, and the names of the seller and buyer. Your accountant can check yours against the current guidance.
How should I value cars I have not sold at the year end?
Stock is valued at the lower of what it cost and what it can realistically be sold for. Cars that have dropped in value may need writing down.
Can I reclaim VAT on my demonstrator?
It depends on how the car is used and how long it is kept as a demonstrator. The rules are specific, so it is worth checking each case.
Do I need FCA authorisation to offer finance?
Introducing customers to credit is a regulated activity, so dealers need FCA authorisation or to act as an appointed representative. A compliance specialist can advise on which suits you.
Who handles my enquiry?
It goes to a qualified accountant who works with motor trade businesses, including car dealers.
Related support
See the real profit on every car you sell
Tell us about your dealership and we’ll arrange a call with an accountant who knows the motor trade.