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Ford dealers need £750,000-per-site to solve post-Brexit VAT issue

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Ford retailers who are unable to find £750,000-per-dealership site to fund a post-Brexit change to the brand’s VAT invoicing regime could be forced out of business, it has been claimed.

Vertu Motors chief executive, Robert Forrester, highlighted the changes to the way Ford invoices dealers for cars destined for UK dealerships in the AM100 retail group’s half-year trading update yesterday (October 7).

He said that Vertu Motors alone – with 22 Ford dealerships – would have to find £15m to fund the changes, which coming into force on January 1, and ASE has calculated that the cost to the wider network will be £750,000 per franchised location.

In anticipation of the post-Brexit changes to VAT regimes from January 1, 2021, Ford is proposing to amend their invoicing process for vehicles imported into the UK, making its retailers the 'importer of record'.

The shift means that vehicles will be invoiced and funded net of VAT, with retailers only able to reclaim the funds when vehicle enter the UK. 

Earlier this year AM reported on Ford’s plans to close almost half of its 400-strong franchised car retail network.

One Ford retailers said that 2021’s VAT changes could be enough to drive certain, less financially resilient retailers out of business, especially in the wake of challenges presented by COVID-19 lockdown.

“In the current climate, with retailers already struggling and running as lean as they can, finding that money is going to be extremely hard and, in some cases, impossible,” said the concerned retailer.

“I see the possibility that some sites will have to close as a result of the issue.”

In its commentary on the situation, ASE said: “The net effect will be that the previous process of VAT recovery, which has advanced cash to dealers, will unravel in the first quarter of 2021 and put strain upon dealers who have not worked this reversal into their cash flow planning.

“This VAT issue is unique to Ford dealers and so has no wider implications for the motor trade as such but is an interesting post-Brexit consequence and possibly one of many to come.”

ASE added: “Whilst Vertu Motors are clearly on top of this issue both from a management perspective and with a good set of results to fall back upon, others may need to look carefully at the impact and plan accordingly.

“As a rule of thumb, Ford dealers may have a cash flow reversal of about £750,000 per site (depending upon precise numbers) so the impact could be significant for those who don’t take notice of what Robert has written.”

AM has approached Ford of Britain for a comment.

Details of the Ford VAT changes come as the brand transitions into the leadership of interim managing director, Lisa Brankin.

Last week AM reported that long-time brand boss Andy Barratt had stepped aside while on a “leave of absence”.

A spokesman for Ford of Britain would give no details of the reason for the move, but told AM: “Andy Barratt has been with Ford for 40 years and continues to be 40 years at Ford.”

 

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