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?
- Pounds Shillings and Pence 1,260 40
- Journals to Creditors Control 52 2
- What sectors to target? 354 15
- Previous auditor threatening to sue our firm for unpaid fees 866 39
- The Copyright Licensing Agency 167 4
- 31 Jan Procrastination Question: Computer Monitors 448 16
- Companies House late filing penalties 3,138 105
- Refusing to complete a tax return 479 11
- Repayment of maternity pay 109 2
- US/UK Dual Citizenship 153 9
- Duplicate emails from AWeb 135 10
- Money laundering and can accountants be sued by clients if they make a report 854 16
- Self assesment online 571 7
- Dissolved company with o/s corporation tax 247 6
- Practice management 250 4
- Teacher doing marking - tax deducted 463 6
- More NI or same 147 1
- Simplified use of home - contradiction 269 4
- maternity allowance for self employed individual 178 1
- Year end 135 1
- Form MR01 (Particulars of a charge) - does this need to be filed if you remortgage with the same lender? 911
- Underpaid VAT assessment and relation to SATR 627
- Did you realise Google will not patch android exploit ... 587
- Latest phishing scam 555
- Cashback for opening business bank acct = trading income? 384
- Auto Enrolment Questions Answered 288
- Loan benefit after person ceases as director/employee 211
- Capital allowances in first basis period 198
- Scratch Head 198
- Sabbatical payments 185