VAT Margin Scheme and importing used cars from the UK — how it works and when it applies

What is the VAT margin scheme?

The VAT margin scheme, commonly referred to as the margin scheme, is a special method of taxation governed by Article 120 of the Polish Act on Value Added Tax. It is used by a taxable dealer who, in the course of their business, buys second-hand goods (such as cars) and resells them. The essence of the mechanism is simple: instead of charging VAT on the full selling price, the dealer charges VAT only on the margin — the difference between the selling price and the purchase price (reduced by the amount of tax due). This avoids the double taxation of goods that have already borne VAT in consumer circulation and on which no right to deduct arose at the time of purchase.

The margin scheme is not available in every situation, however. Article 120 of the VAT Act imposes strict conditions — in particular as to from whom the second-hand goods must have been acquired. The most important of those conditions is discussed below, because it determines whether a car brought in from the UK can subsequently be sold under the margin scheme. This article reflects the legal position as at 2026-06-02; it does not constitute tax advice — please consult a tax adviser.

Who the goods must be acquired from in order to apply the margin scheme

The margin scheme applies to supplies of second-hand goods previously acquired by the taxable dealer from persons listed in Article 120(10) of the VAT Act. In simplified terms, this includes acquisition from: a natural person, legal person or organisational unit that is not a VAT taxable person; a taxable person whose supply was exempt from tax; or another taxable person who themselves applied the margin scheme to that supply. The common denominator in all these cases is that, when acquiring the goods, the dealer had no right to deduct input VAT — either because the transaction did not carry VAT shown on an invoice or because it was already taxed under the margin scheme.

This source-of-acquisition criterion is crucial for cars brought in from abroad. If a vehicle reaches a Polish dealer in a way that does not fall within the list in Article 120(10) — for example as goods imported from outside the EU with import VAT paid — the condition for the margin scheme is in principle not satisfied.

How the margin is calculated and what VAT rate applies

Under the margin scheme, the taxable base is the margin — the difference between the selling amount and the purchase amount, reduced by the amount of tax due. The standard VAT rate, which in Poland is 23%, is applied to the margin so calculated. The invoice is issued as "margin scheme — second-hand goods" and does not show VAT in a way that allows the buyer to reclaim it. We do not provide specific monetary calculations here — the precise figures depend on the transaction prices and should be computed by an accountant or tax adviser.

How VAT works on a car import from the UK (the border stage)

Since Brexit, Great Britain has been a third country for VAT and customs purposes — that is, a country outside the European Union. This means that bringing a used car from the UK into Poland is an import of goods, not an intra-Community acquisition. At customs clearance in Poland, three types of charge arise in principle: customs duty, import VAT, and — in the case of cars — excise duty, which is settled separately after the vehicle is brought in. This is the border moment at which the vehicle "enters" EU circulation, and it is entirely separate from any subsequent resale.

Import VAT is charged on a taxable base that in principle comprises the customs value of the vehicle plus the customs duty payable (and any other import charges). The VAT rate in Poland is 23%. The key point: at the border, import VAT is paid on value — this is not the margin scheme. The margin scheme relates only to a possible subsequent sale, not to the import itself. The method of determining the customs value is described in a separate article (link below). Further details on the customs and tax procedure after Brexit can be found at podatki.gov.pl — Brexit and customs duty.

Import VAT and the right to deduct

Whether the import VAT paid can be reclaimed depends on the importer's status and the intended use of the vehicle. A VAT-registered taxable person who imports a car for business purposes (e.g. for resale) is in principle entitled to deduct the import VAT under the general rules — subject, in the case of passenger cars, to the well-known restrictions on VAT deduction for vehicles. A private individual importing a car for personal use will pay import VAT with no right to deduct. This same "right to deduct" logic matters later: since import VAT was shown and (typically) deductible, the goods do not satisfy the "no right to deduct" condition that underpins the margin scheme.

Why a UK import generally rules out the margin scheme on resale

Bringing the two strands together: the margin scheme requires the goods to have been acquired from one of the persons listed in Article 120(10) of the VAT Act, in a situation where the dealer had no right to deduct input VAT. A car imported from the UK, however, enters circulation through customs clearance at which import VAT is charged. That method of "acquisition" (importation from outside the EU with import VAT paid) does in principle fall outside the qualifying list, and as a result the subsequent resale of such a vehicle is typically taxed under the general rules (VAT at 23% on the full selling price) rather than under the margin scheme.

There is a narrow exception: the margin scheme rules provide for the possibility of applying the scheme to works of art, collectors' items and antiques imported by a taxable person — subject to the election of that procedure, satisfaction of the conditions, and approval/notification of the tax authority. This exception does not cover ordinary used passenger cars — a car is not a work of art or a collectors' item within the meaning of these provisions (edge cases, such as veteran vehicles qualifying as collectors' items, are separate, rare situations requiring individual analysis).

Comparison with the UK VAT margin scheme

Interestingly, an analogous restriction applies on the UK side. The HMRC VAT margin scheme for used vehicles expressly excludes vehicles imported into the UK and vehicles in respect of which VAT has been charged or reclaimed (including import VAT). In other words, in both Poland and the UK the principle is the same: the margin scheme covers secondary-market transactions in goods that have not borne deductible VAT, and importation in principle precludes it. UK sources are cited here for context only — Polish law (Article 120 of the VAT Act) governs an import into Poland. Source: gov.uk — VAT margin scheme for second-hand vehicles and HMRC VATMARG07000.

When the margin scheme does apply — EU cars from a qualifying seller

Given that a UK import generally precludes the margin scheme, when can a dealer apply it to a used car sale at all? Typically when the vehicle was acquired within the European Union from a person who qualifies for the margin scheme — that is, without VAT that would give rise to a right of deduction. The most common scenarios are acquisition of a car:

• from a private individual in the EU (e.g. in Germany, the Netherlands, or France) — a seller who is not a VAT taxable person;
• from a VAT-exempt business whose supply was exempt from tax;
• from another dealer who sold the vehicle under the margin scheme — in which case the buyer may continue the margin-scheme treatment.

In these cases the vehicle has not passed through an import from outside the EU and has not borne deductible VAT, so the source-of-acquisition condition in Article 120(10) may be satisfied. That is why a significant share of the used-car market sold "under the margin scheme" involves cars sourced from EU member states rather than imported from the UK. The difference lies not in the make or year of the car, but in the legal route by which the vehicle reached the dealer. Each individual transaction must be assessed on its own facts — please consult a tax adviser.

The distinction between a UK import and an EU acquisition

In practice it sometimes happens that a car physically originates from Great Britain but is first cleared through customs and placed on the market in another EU member state (e.g. Germany) and only then purchased by a Polish dealer, already as an EU-in-free-circulation vehicle. In such a case it is the character of the last acquisition transaction and the seller's status that determine whether the margin scheme may be applied, rather than the vehicle's country of original origin. This is an area requiring particular documentary care — the chain of transactions, invoices and annotations ("VAT margin") must be consistent throughout.

Consequences for dealers and buyers, and practical risks

The choice between general-rules taxation and the margin scheme has real consequences. Under the general rules, the dealer charges VAT at 23% on the full selling price, and a business buyer can reclaim that VAT (subject to the restrictions on passenger cars). Under the margin scheme, VAT is charged only on the price difference and the invoice does not contain deductible VAT — which is favourable for a consumer buyer but neutral or unfavourable for a business buyer seeking to reclaim VAT.

From the perspective of a UK import, the most significant risk is incorrectly applying the margin scheme to a car that has passed through importation. If a vehicle was imported from the UK with import VAT paid and then sold "under the margin scheme", the tax authority may challenge that treatment and raise a VAT liability plus interest. It is therefore essential to establish clearly, before choosing a procedure, the legal route by which the vehicle was acquired, and to retain full documentation (customs documents, purchase invoices, seller's annotations). This is a tax-sensitive area — if in any doubt, please consult a tax adviser on the VAT treatment and a customs broker on the UK import procedure.

Documentary best practice

• Establish the source of acquisition before purchasing — is the car being imported from outside the EU, or acquired within the EU from a qualifying seller?
• Keep a complete set of documents: the customs entry and proof of import VAT payment (for imports) or the invoice/contract and "VAT margin" annotation (for EU acquisitions).
• Do not assume that a car "from the UK" automatically qualifies for the margin scheme — the default position is the opposite.
• Seek tax advice on unusual transaction chains (UK → another EU country → PL) and on veteran vehicles.

Summary of the current official rules

The VAT margin scheme (Article 120 of the Polish VAT Act) and the VAT treatment of importing a car from the UK are two distinct matters. When importing from Great Britain — a third country outside the EU — import VAT is in principle charged at the border on a taxable base comprising the customs value plus duty (VAT rate in Poland: 23%); this is not the margin scheme. The margin scheme governs the subsequent resale of second-hand goods and requires those goods to have been acquired from a person listed in Article 120(10) of the VAT Act (including a non-taxable person, a VAT-exempt taxable person, or another margin-scheme dealer). Goods imported with import VAT paid do in principle NOT qualify for the margin scheme on resale — except for a narrow exception covering works of art, antiques and collectors' items (not ordinary cars). The margin scheme typically applies to cars acquired within the EU from a qualifying seller. This article reflects the legal position as at 2026-06-02 and does not constitute tax advice — please consult a tax adviser or customs broker before taking action.

FAQ — frequently asked questions

Does the VAT margin scheme apply when importing a used car from the UK to Poland?

No. The import of a car from the UK (a third country outside the EU) is not a margin scheme transaction. At customs clearance in Poland, import VAT is in principle charged on a taxable base comprising the customs value plus duty (VAT rate in Poland: 23%). The margin scheme (Article 120 of the Polish VAT Act) applies only to a subsequent resale of used goods by a taxable dealer, and has separate conditions. Please consult a tax adviser.

What is the VAT margin scheme?

The VAT margin scheme (Article 120 of the Polish VAT Act) is a special procedure under which a taxable dealer trading in second-hand goods taxes only the margin — the difference between the selling price and the purchase price — rather than the full selling price. One of the conditions is that the goods must have been acquired from a person listed in Article 120(10) (e.g. a non-taxable person, a VAT-exempt taxable person, or another margin-scheme dealer). Further details: podatki.gov.pl.

Why does a car imported from the UK generally not qualify for the margin scheme on resale?

The margin scheme requires the goods to have been acquired from one of the persons listed in Article 120(10) of the Polish VAT Act (e.g. a private individual within the EU, a VAT-exempt taxable person, or another margin-scheme dealer). Goods originating from an import outside the EU on which import VAT has been paid do not in principle satisfy this condition — so resale is normally taxed under the general rules rather than the margin scheme. An exception exists for works of art, antiques and collectors' items with the tax authority's approval — but not for ordinary cars. Please confirm with a tax adviser.

When can a dealer apply the VAT margin scheme to a used car sale?

Typically when the car was acquired within the EU from a person who qualifies for the margin scheme — for example from a private individual, a VAT-exempt business, or another dealer who sold the vehicle under the margin scheme. The key factors are the source of acquisition and the absence of a right to deduct input VAT on the purchase. A car bought within the EU under the margin scheme — as opposed to one imported from the UK with import VAT paid — typically qualifies for the margin scheme on resale. Please confirm with a tax adviser.

Are the margin scheme rules the same in the UK and in Poland?

No. They are two separate VAT systems. In Poland the margin scheme is governed by Article 120 of the VAT Act. In the UK the HMRC VAT margin scheme for second-hand vehicles also expressly excludes vehicles imported into the UK and vehicles in respect of which VAT has been charged or reclaimed (including import VAT). The UK rules are referred to here for context only — Polish law applies to an import into Poland. Please consult a tax adviser.

Official sources

• Application of the margin scheme from 1 January 2025 (Article 120 of the VAT Act) — podatki.gov.pl
• Trade in new goods and the VAT margin scheme — podatki.gov.pl
• Brexit and customs duty — import of goods from the UK as a third country — podatki.gov.pl
• Using the VAT margin scheme for second-hand vehicles (UK context) — GOV.UK
• VATMARG07000 — Imports and exports, HMRC internal manual — GOV.UK