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VAT on motor dealer deposit contributions

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HMRC has set out the treatment it expects to see applied to dealer deposit contributions in the motor retail trade, where dealers contribute towards the deposit payable to the finance company, leaving the customer to pay a reduced amount.

HMRC views these arrangements as a discount on the headline price charged by the dealer, with VAT due on the discounted amount actually charged. Where businesses have accounted for VAT on the headline price, they should correct the position either by making a claim for overpaid output tax, or by amending their VAT return, rather than through an adjustment to their VAT account based on reg 38ZA of the VAT Regulations, SI 1995/2518.

See Revenue and Customs Brief 7/2018.

Issue: 1408
Categories: News , Indirect taxes , VAT