HM Revenue and Customers (HMRC) is understood to be about to target motor repairers across the UK to identify incorrect VAT returns and target suspected suppression of sales.
Alison Horner (pictured), head of motor VAT at MHA MacIntyre Hudson, said: "With onerous penalties of 70-100% applied to under declared VAT for deliberate
errors this is an area which the motor trade should consider and act on."
HMRC is also, she said, increasing its interest in how dealers invoice part-exchange cars where there is negative equity involved in the deal.
"Assessments have been raised for under-declared VAT where the finance paperwork does not show the negative equity separately from the retail price
of the new car. Unfortunately, for VAT purposes this leads to a higher value to declare for VAT."
"We are aware that HMRC is taking a proactive approach to this matter so we can help before they contact you or deal with follow up issues if they
are taking action against the VAT values."
HMRC is also understood to be pursuing its penalty regime with "renewed vigour".
"This is backed up with recent tax cases where tax payers received between 70% and 100% penalties for VAT errors which were found to be deliberate.
"In our view, this renewed approach should be taken seriously and bearing in mind the previous comments about risk areas being targeted by HMRC
please contact our VAT team if you would like to discuss any aspect of VAT," said Horner.