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VAT in the motor trade – consignment stocks

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VAT is an increasingly complex tax, particularly in the motor trade where mistakes can be costly due to the high unit values involved. HMRC continue to target motor dealers using specially trained officers, so it’s always worth reviewing your VAT accounting.

Consignment stock arrangements generally preserve ownership of the goods with the manufacturer until certain conditions are met. Typically, these depend on the date a vehicle is adopted or a specified period of time has elapsed. Invoicing and payment terms will vary between manufacturers, and establishing the correct ‘tax point’ for the recovery input VAT can be difficult.

In addition, having a ‘right to return’ the goods can alter the tax point. The actual tax point could be the date payment is made, the receipt of an invoice, the date the vehicle is made available, or the date the vehicle is adopted.   

As always, ‘the devil is in the detail’ and the actual tax point will depend on the specific facts of the arrangements between the manufacturer and the dealer. Establishing the earliest tax point can be key to increasing the cash flow of a business. 

We know that these arrangements can be very different between dealerships and we can only give accurate advice by looking at the exact circumstances.

We recently helped an established main dealer gain a cash flow advantage on his consignment stock.  We were able to identify a tax point which allowed input VAT to be recovered earlier than had previously been achieved. This was an experienced dealership who reasonably assumed that they could only reclaim the VAT when they paid.  

Could we also help you get a similar cash flow benefit?

We know that HMRC VAT inspectors target and test motor traders for a selection of commonly made VAT errors. The VAT team at  Larking Gowen is experienced in these checks and is available to provide help and guidance if required. 

We also offer a VAT health check service for businesses which reviews the exposure to VAT risks, as well as identifying any potential VAT opportunities/savings.

For more information on how we can help, please speak to your usual  Larking Gowen contact. Call 0330 024 0888 or email


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