VAT Demonstrator Briefing Notes
Introduction
Since July 2002 motor industry specialist accountants Trevor Jones Chartered Accountants and specialist VAT consultancy firm Barnard Atkins Limited (t/a The VAT People) have been at the forefront of obtaining substantial VAT refunds for motor dealers throughout the UK with many hundreds of claims submitted and many more currently being processed.
There is now a final deadline of 31 March 2009 by which all relevant claims must be submitted to HMRC representing the last opportunity for motor dealers to benefit from this unprecedented issue.
Trevor Jones Chartered Accountants and Barnard Atkins personnel will bring their specialist knowledge and experience to bear in assisting those dealers who have yet to claim take the necessary action before the deadline.
Technical Overview
- VAT was introduced in 1973.
- Motor dealers could not recover VAT on the purchase of demonstrator cars until 2000.
- Despite this HMRC insisted that motor dealers pay VAT on the profit margin in selling demonstrator units and also on any manufacturer's bonuses received, discounts obtained etc.
- This treatment was successfully challenged in late 1996/97 although most dealers did not hear about it until 1999/2000 when HMRC agreed that demonstrators should be treated the same as trading stock with, for the first time, VAT claimed on purchase and VAT due on sale.
- In separate action HMRC introduced a 3 year cap in 1996/97 limiting any claims for overpaid VAT to 3 calendar years with some dealers submitting claims in 1999 going back to 1996.
- This capping was challenged and eventually overturned in July 2002 following a European case involving Marks & Spencer and the VAT liability of teacakes.
- HMRC invited claims from taxpayers penalised in 1996 to submit claims by 30 June 2003 and rejected claims made after this date.
- HMRC applied various restrictions to the 2003 claims resulting in many being rejected or processed for a lower amount. HMRC's approach put some dealers off pursuing a claim.
- These restrictions were themselves challenged and in January 2008 the House of Lords upheld the affected taxpayer's rights to receive a refund of overpaid VAT and HMRC invited any new or outstanding claims to be made by 31 March 2009.
- No extensions are expected to this deadline.
Average Claim Valuations
- In our experience an average claim can be £50,000 and can double with (simple) interest, but this of course is dependent on the specific circumstances and will vary from dealer to dealer.
Claim Eligibility
We will review and advise on each dealer's eligibility to make a claim but in general;
- The business must have been trading at some point between 1973 and 1996.
- Claims can only be made for trading periods between 1973 and 1996.
- The entity which overpaid VAT is the entity which can make the claim i.e. if the shares in a business have been sold on, it is the new owners who can make the claim not the original ones as they no longer hold the entity which overpaid VAT.
- A valid VAT registration number must be identified for each claimant.
- If demonstrator cars were sold at a profit a margin scheme claim can be made in all periods.
- Some franchise variations and claim restrictions remain on manufacturer's bonus payments.
Support
Further technical support on the relevant issues can of course be provided by contacting Steve, Rob, or Colin on 0161 872 3150.
