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I agree with the previous answers - there are 2 separate transactions.
From VAT Notice 700 (The VAT Guide):
"8.7 Barter and part-exchange
If you supply services, or new or second-hand goods, and receive
other goods or services in full or part-payment, two separate supplies
take place. There is a supply of goods or services from you to your
customer and a supply of goods or services by the customer to you."
So HMRC will still want their £1,750 on your vehicle.
What happens with the new vehicle depends on the VAT status of the seller, whether there is any VAT on this vehicle, and the use to which the vehicle is put. Just treat it like any other vehicle that you buy.
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