VAT for Motor Dealers

VAT is an increasingly complex tax, particularly in the motor trade where mistakes can be costly, due to the high unit values involved. HMRC continue to target motor dealers using specially trained officers, so it’s always worth reviewing your VAT accounting. Here we explain VAT for motor dealers and issues to be aware of.

VAT for Motor Dealers

Consignment stock arrangements generally preserve ownership of the goods with the manufacturer until certain conditions are met. Typically, these depend on the date a vehicle is adopted or a specified period of time has elapsed. Invoicing and payment terms will vary between manufacturers, and establishing the correct ‘tax point’ for the recovery input VAT can be difficult.

In addition, having a ‘right to return’ the goods can alter the tax point. The actual tax point could be the date payment is made, the receipt of an invoice, the date the vehicle is made available, or the date the vehicle is adopted.

As always, ‘the devil is in the detail’ and the actual tax point will depend on the specific facts of the arrangements between the manufacturer and the dealer. Establishing the earliest tax point can be key to increasing the cash flow of a business.

We know that these arrangements can be very different between dealerships and we can only give accurate advice by looking at the exact circumstances. One of our member firms recently helped an established main dealer gain a cash flow advantage on their consignment stock. We were able to identify a tax point which allowed input VAT to be recovered earlier than had previously been achieved. This was an experienced dealership who reasonably assumed that they could only reclaim the VAT when they paid.

How can we Help?

We know that HMRC VAT inspectors target and test motor traders for a selection of commonly made VAT errors. Our Motor and VAT specialists are experienced in these checks and are able to provide help and guidance if required.

We also offer a VAT health check service for businesses which reviews the exposure to VAT risks and identifies any potential VAT opportunities/savings.

If you have any questions or if you would like to discuss any of the issues raised in more detail, please contact Hannah Farmborough or call on 0207 429 4147 to be put in contact with a member of our Motor team or VAT team

This article originally appeared on the blog of our member firm, Larking Gowen.