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MOT tests - can someone help with VAT treatment?

MOT tests - can someone help with VAT treatment?

Strange how so many posts start with 'a new client'.  As so often happens, this one has been done no favours by his previous, erm 'bookkeeper'.  I'm having to backtrack over a number of years to find when he should have registered for VAT, but the MOT test question is making it more difficult.

He is not an approved MOT centre, so has tests done elsewhere.   He charges more than he pays the approved centre, so he is not an agent under VTTAXPER3900, so I don't see how he can treat the cost to him as a disbursement.  However, I am reading VTTAXPER48000 incorrectly, as I find two of the VAT treatments conflict.  One paragraph says that any amount charged over and above the amount paid is taxable at the standard rate.  Yet the next option says that if he does not treat the exact amount that he is charged as a disbursement he must account for VAT on the full invoiced amount.

So, if he only accounts for VAT on the 'profit' under the 1st option, does that mean he has some exempt sales which lead us in to partial VAT calculations?

Any guidance would be greatly appreciated.


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10th May 2012 10:06

As I understand it

MOT testing is "outside the scope of Vat" as shown in

Therefore, would it be correct to assume that, at the moment, your client is not charged Vat, on the cost of the MOT's and, once your client is registered for Vat, he shouldn't charge his customers any Vat output tax, no matter how the "arrangement" for the MOT's is carried out?

Hope this helps.

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to DotasScandalDotOrg
10th May 2012 10:29

yes, but..

Thanks time for a change, but the problem is that he makes a 'profit' on the amount that his supplier charges him, and I am not sure about the VAT treatment of that bit.

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10th May 2012 11:25

Below I have reproduced HMRC guidance to its officers which I think clearly explains the position with regards MOT testing. This has long been an easy target for HMRC in raising assessements on under declared tax


3.1.2 Unapproved test centre

If the business is an unapproved garage, they will normally have to “subcontract”

MOTs to an approved test centre. Provided they show the exact

amount charged by the test centre (after deduction of any discount receivable)

separately on the invoice to the customer, and meet the other conditions of

paragraph 25.1.1 of Public Notice 700 (disbursements), they can treat this

element as a disbursement and outside the scope of VAT. Any amount that is

charged to the customer over and above the amount charged by the test

centre is regarded as payment for services of arranging the test on the

customer’s behalf, and is subject to VAT at the standard rate.

If they choose not to treat the amount charged by the test centre as a

disbursement, or do not satisfy all the conditions set out in paragraph 25.1.1,

then they must account for VAT on the full invoice amount.

It may not make commercial sense for the unapproved garage to show the

cost price of the MOT to the customer (or even disclose to the customer that

the vehicle is being tested elsewhere.) If this is the case, and they charge the

customer more for the MOT than was paid for it, then the

whole supply issubject to VAT at the standard rate. V1-5 Section 2B paragraph 2.18


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to wilcoskip
10th May 2012 11:34

Nice Summary

It is summarised very well by Loise in her post at


separately itemised MOT at exact cost = disbursement


separately itemised MOT at exact cost + separately itemised "arrangement fee" = disbursement + VAT on arrangement fee

MOT at inflated cost/hidden in/included in other items on the invoice = VAT on the whole lot


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By refs8
10th May 2012 12:21


We have had a case like this if you want to PM - happy to tell you more


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14th May 2012 11:54

Alan, above, is correct - but I don't suppose that you needed my endorsement

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