Do you have to have a license to buy and sell cars in the UK?

You don’t need a licence to trade in cars at all in England and Wales. You do however require a licence to deal in cars in Scotland, you can apply for a temporary or full licence via your local authority and fees do apply.

It is commonly held belief that you require a licence to trade in cars in England and Wales. Some of this must be attributed to the licensing requirements in Scotland and articles relating to licensing requirements in various states in the USA.

People may also be confused by the licensing requirements for the sale of fuel from petrol forecourt, which is regulated and does require a licence. Garages also require permits do dispose of used engine oils and for the use of an oil burner. Also if you operate in Wales a business premises which produces 500kg or more of hazardous waste in any 12 month period needs to be registered with Natural Resources Wales.

Local authorities in Scotland require all second-hand car dealers to obtain a licence or registration to operate. This applies to all forms and sizes of car dealers and includes car flippers unless dealing in second-hand goods is only incidental to the main business activity.

Elsewhere in the UK, some local authorities license or register businesses where second-hand dealing is the main or a significant part of the business and is not just incidental. However, certain specific exemptions generally apply – these exemptions typically include motor vehicle dealers regardless of size and age of the business. Businesses which hold consumer credit authorisation are normally also exempt. If you are in any doubt as to whether you require a any for of licensing for your business, its best to contact your local authorities or trading standards department for more guidance.

The need to acquire a licence to be a dealer may also have been confused with the need to register with the DVLA in relation to trade licence plates. If you want to drive unregistered and/or untaxed vehicles which are in your possession, then you would need to apply for trade licence plates (‘trade plates’) from the DVLA. You are only permitted to drive on trade plates for certain purposes – for example test drives, deliveries, and taking a vehicle to another motor trader’s premises.

It’s worth noting that trade plates only exempt you from the need to tax or register a vehicle and they don’t exempt the vehicle from MOT testing requirements or the need for insurance. However by registering your trade plates with the Motor Insurance Database then the relevant authorities will be able to see that you have an appropriate insurance policy’s in place.

Trade licence plates are valid for a period of between six and 12 months, after which you’ll need to renew them if you still need them. A fee is due for applications and renewals. You can find out more and apply for trade licence plates on the Gov.uk website.

It is true that any business intending to carry out MOT testing it will need authorisation from the Driver and Vehicle Standards Agency (DVSA). Application forms must be completed and returned with references and plans of the premises and surroundings areas. Officers from the DVSA will then visit the site to check that the test equipment is functional and calibrated correctly.

As with any other UK business it is essential that you register with HM Revenue & Customs (HMRC). Most if not all car dealers will fall under the ‘high value dealers’ requirements, which cover place anti-money laundering polices and other important issues and regulations. To sell and advise on selling general insurance, warranties and finance you’ll also need to be authorised by the FCA even if selling insurance is only a small part of your business. This includes the normal insurance backed car warranties. 

It is also true that used or franchised dealers are often members or regional of national motor trade association. Which may have also lead to the misunderstanding regarding licensing in England and Wales.

Lastly it is possible that the greater motor trade has poured fuel on the idea that you need a licence as a way of keeping potential competitors out of the market. The motor trade in the UK is a highly competitive business that works on volume meaning even small startups can effect margins profoundly.

Conclusion

Where it is true that car dealers require licensing in Scotland and other parts of the world, no licence is England or Wales. But with so many rules and regulations involved in starting a business it’s no wonder confusion on licensing is commonplace.

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