The move follows allegations of a tax evasion scam involving cars for the disabled, when police arrested six people in an investigation into VAT and benefit fraud.
The investigation centres on allegations of abuse of tax relief available to wheelchair users, allowing them to buy adapted vehicles for resale without paying VAT.
Bob Lewis, senior officer in HM Revenue & Customs’ motor trade team, told AM that he is seeking help from dealers in identifying any suspicious activity.
“If they’re selling zero-rated cars to wheelchair users, somebody should be documenting it and accounting it. This is a relief for genuine use by disabled people. We don’t want to withdraw the relief but we want to make sure it is genuinely used and no-one is making a fast buck out of it,” he said.
The issue does not concern cars provided on the Motability leasing scheme for disabled motorists, which are subject to VAT at the normal rate.
At AM's Financial Challenges in Motor Retail conference, Lewis advised delegates that HMRC assessments revealed significant errors in 60% of transactions in motor retail, almost twice the percentage of other sectors.
HMRC is moving towards a service more closely tailored to motor retail, with specialist staff and a customer-focused attitude where the dealers are the customers.
The aim of this increased focus on the sector is to help define the risks of non-compliance and communicate them better.
Lewis identified sales to finance houses as an area which needs attention, particularly the issue of ‘bumping’ or ‘rolling up’ in sales to finance houses in order to get the customer the required amount of finance.
The VAT must be paid on the sale to the finance house, not the figure on the customer’s invoice, he explained. He warned dealers to pay close attention to invoices to avoid non-compliance. “Dealers need to consistently monitor the business,” he said. “And the sales force needs to know to show the right information to HMRC.”