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15:02 on Tuesday
13 May 2008

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VAT - Garages & MOT test fees


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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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