Margin VAT due on vehicle

Margin VAT due on vehicle

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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' ?

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Replies (5)

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chips_at_mattersey
By Les Howard
29th Oct 2014 16:52

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.

 

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By aj.adams
29th Oct 2014 16:59

Thanks very much, would the profit be subject to Corpration Tax ?

 

 

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By S.K
29th Oct 2014 17:17

What if the client paid vat on the purchase at an auction?

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chips_at_mattersey
By Les Howard
29th Oct 2014 17:33

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.

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RLI
By lionofludesch
29th Oct 2014 17:50

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. 

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