HMRC Targeting Motor Traders for Tax Return Forms

It has just been announced that car dealers or repairers who haven’t been filling in their tax returns properly are being targeted by the…

Image of VAT calculationsIt has just been announced that car dealers or repairers who haven’t been filling in their tax returns properly are being targeted by the HMRC in a new campaign. Within the motor trade there has been a number of changes this year including the abolishment of the paper tax disc, so it’s essential that you make sure your business up to scratch when it comes to the HMRC.

Discussing the campaign, Alison Horner, head of motor VAT at MHA MacIntyre Hudson, said the taxman is looking at how motor traders invoice part-exchange cars where there is negative equity involved in the deal. Alison also stated to AM-Online that anyone selling or repairing cars and declares money under the actual amount they receive may be issued with a fine.

For tax purposes any business or solo trader must be transparent with all of their details which will actually benefit them when searching for their motor trade insurance policy. If motor traders want to get an adequate policy that suits their needs they must ensure that all their details are correct and are filled in thoroughly.

Horner said: “Assessments have been raised for under-declared VAT where the finance paperwork does not show the negative equity separately from the retail price of the new car. Unfortunately, for VAT purposes this leads to a higher value to declare for VAT.”

If you give incorrect information or lie on any of the forms you could start off a disastrous chain of events with Alison Horner stating that there could be fines of up to 100% of the tax cost owed “under declared VAT for deliberate errors”. Alison added: “With onerous penalties of 70-100% applied to under declared VAT for deliberate errors this is an area which the motor trade should consider and act on.”

“We are aware that HMRC is taking a proactive approach to this matter so we can help before they contact you or deal with follow up issues if they are taking action against the VAT values.”
The HMRC are trying to crack down on fraudsters and are investigating this penalty regime with “renewed vigour”.

When motor traders buy a vehicle to sell on they must fill out a VAT return form in order to reclaim the VAT shown on the invoice. To claim VAT you must register with HM Revenue and Customs (HMRC) if your VAT taxable turnover is above £81,000. If your company turnover is less than that you can register voluntarily unless your product or service is exempt.

Once you register your business the HMRC will send you a VAT registration certificate confirming:
• Your VAT number
• When to submit your first VAT Return and payment
• Your “effective date of registration” – this is the date you went over the threshold, or the date you asked to register if it was voluntary

From the date that you register you are legally required to:
• Charge the right amount of VAT
• Pay any VAT due to the HMRC
• Submit VAT Returns
• Keep VAT records and a VAT account

On certain purchases made before you have registered you can claim the VAT back however there is a time limit for this, which is:
• 4 years for goods you still have, or that were used to make other goods you still have
• 6 months for services

You can register online at www.gov.uk and once you have registered your business the HMRC will set you up with an online account. The HMRC also offers agents to submit your VAT Returns and deal with the HMRC for you.

You must register if:
• Your VAT taxable turnover is more than £81,000 (the “threshold”) in a 12 month period
• You receive goods in the UK from the EU worth more than £81,000
• You expect to go over the threshold in a single 30 day period

The HMRC gives you 30 days to register your business if you exceed the threshold however if you don’t register within that time frame you will be charged what you owe. There is also a possibility of receiving a fine or penalty depending on how late you are and how much you owe.

Registering your motor trade business is extremely important especially if you earn over the threshold, so make sure you fill in the forms in detail with all the correct information. If you don’t you could get caught out and end up with a hefty fine under the new crack down on VAT fraudsters.

Photo by stevepb / CC BY-SA 3.0

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