When they do, Car Dealer’s VAT expert Ross Bartholomew warns: ‘Customs will descend on dealers from a great height!’
He says that, at the moment, customs are taking a particular
interest in the motor sector. Dealers therefore need to ensure they’re whiter than white – or they could face crippling penalties.
Following on from Bartholomew’s revelations in last month’s issue on claiming VAT back in time for the March 30 deadline, our expert has come up with some top tips for dealers.
Garages who subcontract MOTs
Multi-franchises who don’t have the space for all the MOTs they take in are particularly susceptible here. ‘There are numerous VAT pitfalls on how you account MOT income,’ says Bartholomew.
Deposits on vehicles
‘These are being sought more readily than they used to, in order to get cashflow. However, VAT is live on them! Not all dealers know this…’
‘This is the biggest thing of all,’ says Bartholomew. ‘It can put dealers out of business.’ What is it? Say, someone buys a £10k car, and has a £2k part-exchange. If the finance has minimum per cent deposit stipulated, say 25 per cent – well, that’s not met here.
However, if the old car is £3.5k, and new one £11.5k, it still only costs the dealer £8k – but the deposit is MORE than 25 per cent! Nobody is left out of pocket, so everyone’s happy? ‘Not the VAT man! VAT is due on £11.5k, not £10k. If they get it wrong, a whole new VAT issue can materialise for dealers. Some have seen bills of £300k.’
‘A particular sticky area is finance commission kickback. Not all is sans VAT, so they can’t claim back all the VAT on costs… and customs are hitting people with big bills as a consequence.’
Bartholomew adds. ‘If you just sit on it and the VAT man comes, you could get penalties AND interest.’
For help, call (01284) 763311.
By RICHARD AUCOCK