F&I Management & Training

The warning comes from George Bull, Baker Tilly's head of tax, who said dealers who have submitted claims for VAT they overpaid on the sale of demonstrator vehicles and had them repaid by HMRC are at risk.

"Until recently HMRC have repaid those claims without issue, many of which ran into millions of pounds. HMRC now believe that, in some cases, they have repaid too much to the motor dealers," he said.

"This reflects a change in their previous view that partial exemption does not generally affect motor dealers. HMRC now believe that some motor dealers will be partly exempt by virtue of the number of demonstrator vehicles sold and, as such, those businesses should reduce the value of their claim by the amount of input VAT they are not entitled to claim on overhead costs.

Bull said HMRC is writing to dealers with to request they calculate whether they are caught by the partial exemption rules. Those that are caught will need to reduce the value of their claim and resubmit it to HMRC.

"The situation is worse for those that have had their claims repaid in the last two years, and who may have already made use of the money," he said.

HMRC is entitled to revisit those claims and claw back any VAT they believe they have overpaid to the dealer. It appears HMRC will be pursuing paid claims very shortly.

"In many cases, motor dealers will not be caught by the partial exemption rules and therefore the refund they have received from HMRC will not be threatened. However, the larger motor dealers with high value claims may well be affected and they should prepare themselves to pay back a proportion of the refund received."

DATED: 27.09.10

FEED: MT