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VAT loophole stays open

The Retail Motor Industry Federation (RMI) has rapped the Government's decision not to take action on the VAT loophole enjoyed by insurer-owned bodyshops, which do not pay tax on repairs.

The industry has lobbied the Government to change the rule, seen as an unfair competitive advantage.

Bob Hood, head of RMI Bodyshop Services Division, described the move as a bitter blow to the industry. “We are shaken to the foundations that the Government is not prepared to act on this matter,” he said.

In a Parliamentary question, Paymaster General Dawn Primarolo told MPs: “Customs and Excise have completed their review after consulting insurers, car repairers and motoring organisations including the Association of British Insurers and the AA, as well as the Office of Fair Trading. “The insurers' investment in productivity helps the competitive development of the car repair market and I do not propose any change to the current rules.”

Mr Hood rejected her comments.

“I fail to see how the existence of such repair facilities can help develop the market in any way,” he said. “The fact that insurer-owned bodyshops enjoy the VAT advantage over their competitors gives them, in my opinion, unfair advantage in an already highly competitive market.”

Mr Hood is urging all RMI bodyshop members to lobby their MPs to try to influence a change.

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