Do I charge VAT when selling business assets

Yes, usually. If you are VAT registered, selling equipment, vans, furniture and other goods that belong to the business is a taxable supply and you charge VAT on the full price, whether or not you reclaimed VAT when you bought them. The main exception is goods whose purchase VAT was wholly blocked, such as most company cars, which are sold exempt with no VAT charged.

Why is selling an old asset a supply at all?

VAT is charged on supplies made in the course or furtherance of a business, and the sale of a business asset is part of running the business even if the business does not trade in that kind of item. Schedule 4, paragraph 5(1) of the VAT Act 1994 goes further: where goods forming part of the assets of a business are transferred or disposed of so as no longer to form part of those assets, whether or not for a consideration, that is a supply of goods. HMRC repeats this in VAT Notice 700 section 9.1, which says that selling, giving away or taking goods into private use is normally a supply, and where it is taxable you must account for VAT.

So a printing firm selling a used press, a café selling its old coffee machine, or a builder selling a van all charge VAT at the rate that applies to those goods, which for most equipment is the standard rate.

Does it make a difference that I did not reclaim VAT when I bought it?

Generally, no. The charge on the sale depends on the item being a business asset when you sell it, not on whether you recovered VAT on the purchase. An asset bought before you registered, or bought from a private seller without VAT, is still a business asset, and its sale is still taxable on the full price.

There are two qualifications. First, HMRC’s manual at VIT10600 accepts that someone who buys goods for both business and private use can choose to keep them wholly outside the business, make no input tax claim, and then not charge VAT if they are sold later. That choice has to be made at purchase and consistently followed. Second, for certain second hand goods bought without VAT, a margin scheme may let you account for VAT only on your profit; see the VAT margin scheme.

When is the sale exempt instead?

Schedule 9, Group 14 of the VAT Act 1994, added from 1 March 2000, exempts a supply of goods where the only input tax on acquiring them was non deductible input tax. The notes to Group 14 define that as input tax that was blocked by one of the specific Input Tax Order provisions, namely article 5 (business entertainment), article 6 (certain fixtures in buildings) and article 7 (motor cars), or input tax that was not attributable to taxable supplies at all.

In practice this covers two situations:

• Cars whose purchase VAT was blocked. VAT Notice 700/64 section 7.2 says that if you were charged VAT on a car but could not recover any of it, you do not charge VAT on the sale and cannot issue a tax invoice, because the sale is exempt. VAT on costs directly related to the sale, such as auction fees, is then exempt input tax.
• Goods used only for exempt activity. Where the purchase VAT related wholly to exempt supplies, for example equipment used only in an exempt insurance or financial services business, the later sale also falls within Group 14.

Group 14 does not apply simply because you chose not to claim, or forgot to claim. The input tax has to be non deductible under those rules.

How are cars and vans treated when sold?

Vehicle and history	VAT on sale	Notice 700/64
Car where purchase VAT was blocked	Exempt, no VAT and no tax invoice	Section 7.2
Car where VAT was recovered, such as a pool car or driving school car	VAT on the full selling price; margin scheme not available	Section 7.1
Car bought without VAT, such as from a private individual	Margin scheme available, VAT only on the margin	Section 7.3
Van or other commercial vehicle where at least part of the VAT was recoverable	VAT on the full selling price	Section 7.4
Van bought without VAT	Margin scheme available	Section 7.4

For the purchase side, see can a business reclaim VAT on a car and VAT on vans and double cab pickups.

What if I give the asset away or take it for myself?

Taking an asset out of the business without payment is still a supply under Schedule 4, paragraph 5(1). Notice 700 section 9.3.1 explains that where goods are put to permanent private use with no consideration, VAT is due on the cost of the goods, meaning what it would cost to buy the goods at that time, or failing that similar goods of the same age and condition. Paragraph 5(2) excludes business gifts costing not more than £50 in total to the same person in a 12 month period, and free samples. Selling an asset to a director below its value raises separate company and income tax issues; see selling company assets to a director below value.

What about selling the whole business or deregistering?

If the assets are sold as part of a business transferred as a going concern, Notice 700 section 9.1 says special rules apply and points to its going concern guidance; see transfer of a going concern.

If you cancel your registration while keeping assets, VAT Notice 700/11 section 7 says you may have to account for VAT on stock and assets on hand, including items such as plant, furniture, commercial vehicles and computers on which you claimed VAT. No VAT is due if the total would be £1,000 or less, which for standard rated assets means a total VAT inclusive value of £6,000 or less. Intangible assets such as goodwill are not included. See VAT deregistration.

What does this look like in practice?

Illustration only. A fully taxable company sells three items in one quarter, all to unconnected buyers at market value:

• a laptop bought before VAT registration, sold for £300: VAT is due, £50 on a VAT inclusive price
• a van on which VAT was reclaimed, sold for £9,000 plus VAT: output tax of £1,800
• a director’s company car on which the purchase VAT was blocked, sold for £12,000: exempt, no VAT charged

The exempt car sale is also a supply to consider in the partial exemption position, since the related auction or selling costs carry exempt input tax.

What mistakes come up most often?

• Leaving asset sales off the return because they are not normal sales income.
• Charging VAT on a blocked car, or failing to charge it on a pool car or driving school car where VAT was recovered.
• Assuming no VAT is due because none was reclaimed on purchase.
• Recording the sale proceeds as VAT exclusive when the buyer paid a single price, so output tax is understated. If a past asset sale was missed, see correcting VAT errors.

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Related Accountapedia entries

• VAT margin scheme for used car dealers
• How VAT works: output tax and input tax
• The VAT margin scheme for second hand goods
• Zero rated vs exempt supplies
• Reclaiming VAT on costs before registration
• What counts as business activity for VAT

Sources

• legislation.gov.uk: Act 1994 c. 23, schedule 4
• GOV.UK: Vat guide notice 700
• GOV.UK: Manual page VIT10600
• legislation.gov.uk: Act 1994 c. 23, schedule 9
• GOV.UK: Vat on motoring expenses notice 70064
• GOV.UK: Vat notice 70011 cancelling your registration

Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 19 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.