VAT scheme on 'excess' MOT charges
Hi all! Thanks for taking the time to read this.
As the title suggests need some information on the treatment of MOT and VAT. I have done some research and would like some input on the conclusion reached if willing?
Client is a VAT registered business in the automobile repair industry. Client does not conduct MOT tests however subcontract this and charges the customer the cost plus a mark up.
Should the MOT charge be: (i) outside the scope of VAT; (ii) standard VAT on mark up ('excess' hereafter) or (iii) standard VAT on cost plus mark up.
Research and conclusion
I have reviewed VTAXPER48000 and VTAXPER39000.
The MOT charge would be (i) outside the scope of VAT as "provided the unapproved garage charges on the exact amount it has been charged by the test centre and shows this separately on the invoice to its customer, it may treat this element as a disbursement and also outside the scope of VAT".
The MOT charge would be (ii) standard VAT on mark up as "any amount charged by an unapproved garage to its customer over and above the amount charged by the test centre is consideration for its own service of arranging the test as agent of the customer and is taxable at the standard rate".
The MOT charge would be (iii) standard VAT on cost plus mark up as "if the unapproved garage chooses not to treat the exact amount charged by the test centre as a disbursement, or otherwise does not satisfy all the conditions set out in VTAXPER39000, it must account for VAT on the full invoiced amount".
The 8 conditions stated in VTAXPER39000 being:
- the person acted as an agent of his client when he paid the third party;
- the client and not the agent used the goods and services supplied by the third party (in practice, this is usually the key condition);
- the client was responsible for paying the third party;
- the agent was authorised by his client to pay the third party on his behalf;
- the client knew that the goods or services were to be provided to him by a third party;
- the agent’s outlay is separately itemised when he invoices the client;
- the amount recovered from the client is exactly the same amount as paid to the third party;
- the goods or services paid for by the agent are clearly additional to the agent’s own supplies.
How rigorously should these be tested - would it be a fair assumption that most automobile repair business subcontracting MOT would meed these conditions by default?
- Client with enquiry inro careless or negligent tax return 855 23
- How does the tax payer dis-apply/disclaim from use of their personal allowance? 506 12
- Classic cars investment 350 10
- Failure to operate PAYE 992 25
- NI Contributions in order to claim state pension 177 3
- break even point 678 20
- Asset holding company 269 6
- How much to charge? 454 7
- National Insurance Contributions 119 1
- VAT GUIDE - 22-25 AGENTS OR EQUIVALENT 317 6
- Lack of Quickbooks Online Coverage 239 3
- Growing Limited Company concerned about assets if something goes wrong 278 1
- I think I'm developing an anger issue 3,019 36
- HMRC Getting Extra Tough? 780 8
- IR 35 deemed payment calc 234 5
- Gift or Capital Gain? 448 13
- SA302s - Lenders to accept non hmrc copies 663 9
- HMRC - Sage Backup 260 5
- Abandoning accountancy membership in order to operate as a sole trader 1,188 29
- BrightPay 752 23
- Possible Partnership? 480
- Tax and accounting treatment on long lease granted from freehold 452
- Lunatics in charge of the asylum - Bluestone 447
- New Fangled Penalties 259
- Purchase of property freehold - capitalisation of costs 245
- Clubs and Taxable Income 234
- Subsistence and hotel expenses 231
- Deferring taxable income until after 5 April 220
- Loans to other companies 179
- Tasbook email configuration 167