A car retailing client is to receive an insurance payment on a vehicle that was destroyed whilst at third party premises. The settlement is at a higher amount than original cost. Is margin VAT payable on the 'profit' ?
Thanks
Replies (5)
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Insurance Settlement
There is no supply in the circumstances you describe. No output tax is due, whether the car was eligible for the margin scheme or not.
Insurance Settlement
There is still no supply by the motor dealer.
There is some HMRC guidance here: http://www.hmrc.gov.uk/manuals/vatscmanual/VATSC50000.htm - this provides some examples where consideration is not in return for a supply.
If the dealer did recover input tax, then that is likely to affect the insurance company's VAT position, under SI 1995/1268, art 4.
Agree with Les
The motor dealer is not in business to have his car damaged. There's no supply. The proceeds are taxable, though, for IT/CT purposes.