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A recent development will benefit many
garages who provide MOT tests through separate, authorised garages.
It is common practice for the garage to obtain the test at a
discount, and to charge the final customer the standard retail
price. (The ‘profit,’ quite fairly offsets the costs associated with
arranging the test, and transporting the vehicle to and from the
text centre.
Guidance published by Revenue &
Customs has meant that many garages have had to pay VAT on the full
amount charged for the MOT.
A garage north of the border was
assessed by a visiting VAT Officer for £2,475 on precisely this
basis. The garage felt this was unfair, and appealed to the
Tribunal. The Tribunal reviewed part of European legislation, which
it suggested has not been implemented in the UK. The Tribunal also
noted that the garage could not lawfully have carried out the MOT
test, and therefore it had to act as agent for the customer in
obtaining a test. The additional charge made provided for a delivery
and collection of the vehicle.
The Tribunal differentiated the
instance where a car dealer sells a car with a new MOT test, and
accepted that the dealer was supplying a tested car, and was not
entitled to separate out the MOT test fee.
The Tribunal therefore found in the
taxpayer’s favour.
Customs have the problem that there
are Tribunal decisions that have been decided in contradictory way.
They may want to pursue the matter to the High Court.
In the interim, there is no reason
why a garage should not make a claim:
- where Customs have raised
an assessment in the circumstances described above;
- where the garage has accounted for VAT on the full value
of MOTs charged to customers.
Whether Customs will pay any claim
remains to be seen. However, it is better to put a claim in now. If
you leave it till later, the three year cap will mean that VAT paid
in older VAT quarters cannot be reclaimed.
May 2007
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