VAT Margin and warranty

[Grantlfc81 88]

ok so, i have been speaking to another dealer, and he has been building in a £400 warranty cost to the business on the car to reduce the VAT Margin Liability.

is this allowed?

Grant

[Nick M.K. 574]

11 minutes ago, tradex said:

But don't matter anyway, vat is paid on bought in to sold out

What Grant is saying is that the dealer reduces his sold out price by £400 saying that the £400 is not part of his margin but the cost of his warranty (which is an insurance product). 

Insurance products are exempt from VAT but: 

"something is insurance for VAT purposes if it’s an activity that requires the provider to be authorised as an insurer under the provisions of the Financial Services and Markets Act 2000 (FSMA)."

So if that dealer is not authorised as an insurer under FSMA he is in trouble.

[justina3 518]

1 hour ago, Grantlfc81 said:

ok so, i have been speaking to another dealer, and he has been building in a £400 warranty cost to the business on the car to reduce the VAT Margin Liability.

is this allowed?

Grant

Not a cats chance in hell of that getting past, get the lube out or thst inspection is going to hurt when it comes. 

Just curious how he deals with a warranty claim ? Accounting wise 

[Grantlfc81 88]

ok worth a try.... ive tried to piss about with it in my Dealer management software today, but the software was not having any of it.... and invoice kept saying the full VAT margin due still.  Worth a go guys! keep these ideas flying about.

[justina3 518]

Save you some time there is no way to bend the rules sooner or later you end up with a big fine or in the dock.

You only have to look at the recent news with footballers and managers being stung for millions no matter how big you are or how clever your accountants are they all get caught sooner or later. 

[Area 51 33]

Tend to agree with all the advice to avoid trying to swerve this.. The lightweights at HMRC will only spot it and then share the "news" and up scrutiny of all motor trader accounts..

2019 Making Tax Digital is a euphemism for helping HMRC to screw you "not only faster but harder".....

If it aint, then this is a public forum and they have just been told where to look .. what was it someone said about death and taxes...

 

[David Ayers 171]

19 minutes ago, justina3 said:

Save you some time there is no way to bend the rules sooner or later you end up with a big fine or in the dock.

You only have to look at the recent news with footballers and managers being stung for millions no matter how big you are or how clever your accountants are they all get caught sooner or later. 

Can’t you just ask your Mrs for any ideas for paying less Vat? 

Although I can guess the answer will be “pay what you owe. It will be cheaper in the long run”

[Mark101 536]

There is no way to avoid paying VAT margin.  It’s a sting in the tail for sure.  For example, I took a £500 hit on a CRV because it was a money pit, as it was sold above acquisition cost (hammer and fees), I still had to pay some VAT margin.

Equally, recently had it off with £2.5k gross on a £7k car - looks lovely until you deduct the VAT margin due.

Edited February 19, 2019 by Mark101

[justina3 518]

16 minutes ago, David Ayers said:

Can’t you just ask your Mrs for any ideas for paying less Vat? 

Although I can guess the answer will be “pay what you owe. It will be cheaper in the long run”

Oddly enough thats almost word for word what says, and if you spent half as much time paying attention to running your business instead of fiddling a few quid here or there and looking over your shoulder for years to come guess which one i suggest.

We are in the middle of an audit now by the beloved HMRC but for CIS and paye and you should see the cat fighting between vat inspectors and tax inspectors not much love lost there, i did ask whats the deal but just got told to eat my tea...i know when to be quiet.

 

[trade vet 697]

Inflated,pretend warranties to suppress VAT.People were getting caught with that one in the 80’s.Basically it is fraud and HMRC charge a lot extra for that.

[Tony F 38]

21 hours ago, trade vet said:

Inflated,pretend warranties to suppress VAT.People were getting caught with that one in the 80’s.Basically it is fraud and HMRC charge a lot extra for that.

Correct Trade Vet. It was a big thing specially as there had been no vat due on used cars up to the late 70s. I was at the main dealers back then and all warranty prices were inflated and retail cars and p/ex values were continuously written back to reduce vat liability.

Also, if someone shows a warranty (ficticious or not) at £400 on their invoice it means its a seperate sold item so it attracts ipt tax at 20% instead of 12% had the product been included 'foc' within the car sale price.

One bit of advice I can offer though is that some dealers still don't know/realise to include their auction indemnity fees as part of the overall purchase price of a car. Doesn't sound like much but say eg 10cars, 10 lots of £300 indem is 3k a month, which means you would be giving the vat man an extra 5-600 a month unnnecssarily. Hope this may help a few.

[justina3 518]

On 2/20/2019 at 5:07 PM, Tony F said:

 

One bit of advice I can offer though is that some dealers still don't know/realise to include their auction indemnity fees as part of the overall purchase price of a car. Doesn't sound like much but say eg 10cars, 10 lots of £300 indem is 3k a month, which means you would be giving the vat man an extra 5-600 a month unnnecssarily. Hope this may help a few.

What if the vat is shown separate on the auction invoice ? 

[EPV 631]

2 hours ago, justina3 said:

What if the vat is shown separate on the auction invoice ? 

I was under the impression that you can’t include any VAT within the purchase price of the car. Nett buyer fees yes but not any VAT charged in sure check or online fees or whatever else they put on top of your hammer price?

[Nick M.K. 574]

23 hours ago, EPV said:

I was under the impression that you can’t include any VAT within the purchase price of the car.

You have a choice. 

Include that VAT in the purchase price (BCA assured is a good example) and don't claim it back in your VAT return OR don't include it and claim it back. It is the same deal ultimately. 

[EPV 631]

Just now, Nick M.K. said:

You have a choice. 

Include that VAT in the purchase price (BCA assured is a good example) and don't claim it back in your VAT return OR don't include it and claim it back. It is the same deal ultimately. 

Ah OK. I do the latter, i.e. don't include it in the cost of the vehicle (hammer plus nett fees) but claim it back.