After a long period of uncertainty, HMRC have now confirmed their policy in respect of motor dealer deposit contributions (DDC). The outcome is that DDC are not subject to VAT and HMRC have invited claims from motor dealers who have historically accounted for VAT on these contributions.
Motor dealers who operate DDC type promotions will have adopted different VAT accounting treatments. The issue concerns dealers who sell vehicles to customers under a financing contract and who subsidise the purchase by contributing towards the deposit required by the finance company.
HMRC now accept that the DDC is a discount and that dealers should only pay VAT on the actual amount they receive for the vehicle.
However, some dealers may have accounted for VAT on the gross sale price of the vehicle, including the DDC, and will therefore have over declared VAT.
Dealerships should now review the historic VAT treatment applied in the last 4 years. Where VAT appears to have been overpaid, a claim should be submitted to HMRC.
Please contact Debbie Smith (firstname.lastname@example.org) or your usual AAB contact if you would like any further information or assistance with the review process and with preparing and submitting the claim.
To find out more about Debbie and the Indirect Taxes Team, click here