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Caution urged despite Camden’s VAT win

VAT experts are warning motor retailers that a tribunal victory for Camden Motors Group does not automatically guarantee success with other claims.

Camden’s action could mean a saving of £1.5 million relating to three years of payments, according to chief operating officer David Hammond.

“We are saying VAT payments should be assessed on a fair basis,” he said.

“We believe the tribunal agreed, but there could be an appeal.”

The case is the latest in a series within the retail motor industry, brought about by confusion over what is liable for VAT and what is exempt.

Camden’s challenge could change the way motor retailers can set VAT-exempt transactions against those where VAT needs to be paid.

Camden objected to HMRC’s ruling that dealer groups should consider only the level of profit on exempt activities – and compare it with that on others.

HMRC focused on finance and insurance income, saying margins were typically higher than on car sales.

Michelle Malone, VAT manager at accountants Trevor Jones, said: “The ruling may appear to relate equally to many other motor dealers but HMRC views each set of circumstances in isolation.

“The complication in the motor trade is the combination of income from the sale of a vehicle and any associated F&I income – and how much is exempt from VAT payment. ”

David Raistrick, automotive partner at Deloitte, viewed the tribunal decision as potentially important because HMRC’s new approach could cost dealers millions of pounds. He also warned that HMRC might appeal.

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