Cars, Finance and Input Tax

Andrew Hitchmough and Jonathan Bremner Pump Court Tax Chambers comment on the decision in Camden Motors (Holdings) Ltd

Does a car dealer use more of its VAT-bearing overhead costs in generating £1 of income from selling cars than it does in generating £1 of income from selling finance — or is it the other way round? This was just one of the questions that the VAT Tribunal (Miss JC Gort Chairman) had to address in Camden Motors (Holdings) Ltd in reaching its decision that Camden had been correct to apply the standard method in calculating its residual input tax recovery rate. This important decision will be of obvious interest to motor traders but also offers helpful general guidance on how to decide whether the standard method provides a fair and reasonable proxy...