Selling a company car: book profit, VAT and disinvestment

Step one: book profit or loss

On your balance sheet the car sits at its book value: the purchase price less the depreciation so far. Sell it for more than that book value and the difference is book profit, which counts towards that year's profit. Sell for less and you take a book loss that lowers your profit. It can add up: depreciating a car over five years to a residual value of € 5,000 but selling it for € 12,000 puts € 7,000 of extra profit into one year.

That spike can be tempered. If you expect a book profit and already have a replacement in mind, look at the reinvestment reserve: you park the book profit and write it off against the new car, deferring the tax. And mind the timing: selling in January rather than December shifts the whole profit by a year, which matters in a peak year. See steering profit around year-end.

Step two: VAT on the sale

If the car belongs to your business assets for VAT, you charge 21% VAT on the sale price, whether you sell to a dealer or a private buyer. You remit that VAT in the return for the quarter of delivery. Do not forget to build it into your asking price: sell to a private buyer for € 12,100 and € 2,100 of that belongs to the tax authorities.

If you bought the car without VAT at the time, from a private seller or under the margin scheme, you never deducted VAT. You may only apply the margin scheme on sale if trading in that kind of used goods is part of your normal business activities. If you are not a car dealer that route is closed and you charge 21% VAT on the whole sale price, even though you deducted nothing on purchase. That is exactly why it is wise to keep a car bought without VAT outside your business assets for VAT purposes, and to discuss it with your bookkeeper before buying.

Step three: the disinvestment addition

If you received small-scale investment deduction on purchase, you must repay part of it when you sell the asset within five years of the start of the investment year and the proceeds exceed € 2,900. That is the disinvestment addition: you add the same percentage as your original deduction to your profit, calculated on the sale price, capped at the amount you originally received.

An important detail: ordinary passenger cars are excluded from the KIA, so this does not arise there. With a van, a taxi or a vehicle for professional transport it does, and that is exactly where it often goes wrong. If the investment attracted energy or environmental deductions, comparable rules apply over a longer period.

Or you move it to private ownership

You need not sell the car to remove it from your balance sheet. Withdrawing it from business assets is also possible, for instance when you stop trading or switch to the mileage allowance. For tax it works much like a sale: you settle at the market value, the price a third party would pay. If that exceeds book value you take the book profit, and VAT is generally due on that same value if you deducted VAT on purchase.

Substantiate that value with something checkable: a dealer's trade-in offer, a valuation or a printout of comparable used cars. Too low a value is a classic point of dispute in an audit, certainly around stopping or pausing, when the whole balance sheet is reviewed. Keep the substantiation with your annual figures.

Frequently asked questions