Understanding VAT Accounting: Dealer Deposit Contribution

What has happened?

HMRC have recently confirmed that the motor dealer deposit contributions are not subject to VAT and it has invited businesses to make a claim to recover any overpaid output tax. The motor dealer deposit contributions are affectively a discount on the cost of the vehicle.

There has always been a lot of confusion over the correct treatment of these deposit contributions with some dealerships accounting for the VAT on the gross sale price including the dealer contribution while others have reduced the net price of the vehicle by the value of the contribution and then calculated the VAT on this figure.

How this affects you?

If you’re a motor dealership who has always accounted for the VAT on the gross sales price (pre dealer contribution) then you should be looking to claim back the additional VAT you have over-declared. For every £1,000 dealer deposit £200 is potentially reclaimable. The claims can be back-dated for four years so it is important that any businesses which are affected act promptly in making a claim and also in changing the way the dealer deposit contributions are being accounted for.

What can we do?

The VAT advisors at Haines Watts can assist you with making a claim for any overstated output tax and can also ensure that the motor dealer deposit contributions are being correctly accounted for to ensure you are only declaring the output tax which you should. If you would like to discuss this further please contact Haines Watts.

If this is something which you would like to discuss further please feel free to contact us and we can discuss your own VAT position.