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Dealers due for another VAT windfall

Dealers could be in line for a second tax windfall from Customs & Excise this year, according to financial experts. The payouts would follow refunds made over the past 12 months by Customs on VAT paid by dealers on demonstrator vehicles dating back more than 30 years.

Customs is waiting for a legal ruling expected in September on a non-motor case which will have major implications for car retailers. It concerns demonstrator bonuses relating to so-called ‘Regulation 29’ and whether bonuses were posted by dealers as negative input tax or positive output tax. Previously output tax attracted VAT and input tax didn’t, but Customs is expected to treat both the same, which means repayments for dealers. The court ruling will also impact on repayment returns.

Gerry Myton, a tax/VAT specialist at Grant Thornton, says: “It means more money for some dealers. We expect a decision to be made in mid to late October.”

Meanwhile, Customs & Excise has dismissed speculation that it plans to recover some of the money paid out to dealers over the demonstrator/VAT issue. One source told AM that some dealers had been overpaid by including VAT charged at today’s 17.5% over the full period. But Customs denies it is taking this action. “We have no general plans to recover overpayment that people may have received,” says a spokeswoman. “We might look at cases on an exceptional basis, but not across the board.”

Myton says he is aware of only one instance where Customs has issued a retrospective assessment on the basis that the dealer has been overpaid. He does not believe it is a significant issue.

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