Under the Margin Scheme for second-hand cars you pay VAT on the difference between what you paid for a vehicle and what you sold it for.
CarVue already calculates the VAT margin on qualifying vehicle sales and posts the amount to your Xero VAT account as a separate journals. Unfortunately, Xero doesn’t currently support including these amounts in their VAT return (they may do in the future), so this needs to be done manually in Xero before you submit your return.
To help, we’ve added a notification to remind you to do that from the VAT margin tab.
Please see below official Xero statement regarding VAT margin scheme from Tim Wright
Please visit Xero website for more details.