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VAT changes spark dealer confusion

Retailers face growing confusion after Customs and Excise announced changes to the way it handles claims for overpaid VAT on car demonstrators. Analysts say changes were sparked after Customs was swamped by “inflated” applications from dealers – some were attempting to claim more than their annual turnover. Officials say: “The aim is to repay the business the amount they actually overpaid.”

Now Customs is bringing together a team of experts to act as moderators who will reassess the value of every claim, including the estimated £9m already paid to Caledonia and Ryland. Experts say Customs is unlikely to reclaim money where claims have been paid and contain no factual inaccuracies.

In total, 1300 companies in the retail sector are claiming more than £780m-worth of overpaid VAT, exclusive of interest. Most of the claimants are motor traders reacting to an earlier European Union ruling that Customs and Excise was not entitled to charge dealers VAT on profits made when selling demonstrator vehicles above cost price.

Claims will be scaled according to business size and officers will use actual rather than average values when making assessments. Dealers might also have to re-submit claims.

The news has attracted mixed views from finance experts. One says: “The changes mean it's going to be harder for dealers to get their money back and it is going to take longer.”

Another adds: “Customs obviously has a large number of claims and it is looking for ways to reduce pay-outs.” A third says: “Some claims will go up, others will go down.”

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