VAT Claims for Motor Finance Houses
HMRC have issued an invitation to Finance Houses (amongst others) to make claims for VAT overdeclared as a result of the UK’s failure to apply European rules on VAT bad debt relief correctly in the period April 1, 1989 to March 19, 1997.
During that time, it was a condition of the UK bad debt scheme that title in the goods must have passed to the customer. In circumstances where a finance company sold a car on deferred payment terms, this usually involved some reservation of title until the customer had paid for the vehicle in full. Where customers failed to make full payment, in which case the car would be repossessed, this meant that a finance company were unable to claim any bad debt relief on most occasions.
In the case of GMAC UK plc v HMRC the Court of Appeal has confirmed GMAC’s right to a refund of VAT to the extent that payments by its customers fell short of the amount required to pay for a car. HMRC have issued a Business Brief (1/2017) inviting claims for those in a similar position. Unlike most VAT repayment claims, this is not subject to the usual 4-year cap, but it will be necessary to demonstrate the validity of a claim i.e. that the amount claimed is accurate and that no bad debt relief was claimed at the time.
Any business which believes it may be able to make a valid claim is invited to contact Glyn Edwards, VAT Director at MHA MacIntytre Hudson