Monday, September 29, 2008
Car dealers hit by new tax hike
Car dealers are facing additional VED charges of £10,000 a year under new rules on the tax treatment of part-exchanges and pre-registered dealer demonstrators being introduced by the DVLA.
The new rules, due to be introduced in January 2009, will place a restriction on VED refunds to dealers who have completed a Sorn, or statutorily off-the-road, declaration for used vehicles.
"This is going to have a significant impact on dealers. At present most dealers cash in the VED when they get a part-exchange and then sell the car complete with a new tax disc, the price of which is usually added to the sale," said Mike Jones, a partner at Trevor Jones, the specialist motor trade accountancy firm.
"Under the new regulations it appears that dealers can only obtain a refund when they are declared the registered owner of the vehicle and they have declared the vehicle Sorn," he said.
According to the DVLA the Sorn confirmation letters are sent within four weeks of receipt but this delay could leave dealers out of pocket.
"This will significantly delay the process of obtaining a refund and, in effect, reduce the size of the refund as the dealers would then have to claim for a month less," he said.
"I think the financial impact is likely to be up to £10,000 for the average dealer, although if they choose not to throw VED in with the price of the car this would be significantly reduced."
According to Jones dealers might be tempted to write-off the VED refunds rather than take a further hit on book values falling whilst they wait for their Sorn to be processed.
"In the current environment moving used vehicle stock quickly is of paramount importance. Dealers need to decide how they want to react to the changes. For vehicles taken in as a part-exchange dealers are likely to forgo the refund which will reduce their trade sale profits," he said.
One dealer who contacted Motor Trader said the rules would seriously affect the way they trade their used stock."I don't believe dealer networks realise the full implications. Customers trading-in cars at dealers will have to cash the tax in themselves and declare the car Sorn which will mean the dealer cannot then demonstrate the car on trade plates as they currently do.
"Imagine the impact if 50 per cent of your used car stock cannot be demonstrated because they are Sorn," he said.
DATED: 29.09.08
FEED: MT
The new rules, due to be introduced in January 2009, will place a restriction on VED refunds to dealers who have completed a Sorn, or statutorily off-the-road, declaration for used vehicles.
"This is going to have a significant impact on dealers. At present most dealers cash in the VED when they get a part-exchange and then sell the car complete with a new tax disc, the price of which is usually added to the sale," said Mike Jones, a partner at Trevor Jones, the specialist motor trade accountancy firm.
"Under the new regulations it appears that dealers can only obtain a refund when they are declared the registered owner of the vehicle and they have declared the vehicle Sorn," he said.
According to the DVLA the Sorn confirmation letters are sent within four weeks of receipt but this delay could leave dealers out of pocket.
"This will significantly delay the process of obtaining a refund and, in effect, reduce the size of the refund as the dealers would then have to claim for a month less," he said.
"I think the financial impact is likely to be up to £10,000 for the average dealer, although if they choose not to throw VED in with the price of the car this would be significantly reduced."
According to Jones dealers might be tempted to write-off the VED refunds rather than take a further hit on book values falling whilst they wait for their Sorn to be processed.
"In the current environment moving used vehicle stock quickly is of paramount importance. Dealers need to decide how they want to react to the changes. For vehicles taken in as a part-exchange dealers are likely to forgo the refund which will reduce their trade sale profits," he said.
One dealer who contacted Motor Trader said the rules would seriously affect the way they trade their used stock."I don't believe dealer networks realise the full implications. Customers trading-in cars at dealers will have to cash the tax in themselves and declare the car Sorn which will mean the dealer cannot then demonstrate the car on trade plates as they currently do.
"Imagine the impact if 50 per cent of your used car stock cannot be demonstrated because they are Sorn," he said.
DATED: 29.09.08
FEED: MT
