Accounting services
VAT returns and advice for the motor trade
Motor Trade Accounting puts garages, dealers and other motor businesses across the UK in touch with specialist VAT support. From quarterly returns to the awkward questions about cars, vans and finance commission, get answers that fit how the trade works.
Why VAT is different in the motor trade
Most businesses deal with one or two VAT rates and a predictable set of purchases. A motor business can have standard-rated labour and parts, margin scheme vehicle sales, exempt finance commission, blocked input tax on some cars and reclaimable VAT on vans, all in the same quarter. Each one has to land in the right box on the return, and the errors tend to be expensive because the sums involved are large.
Every VAT-registered business now keeps digital records and files its returns through software that works with HMRC's Making Tax Digital system. Returns are usually quarterly, and both the return and the payment are due one month and seven days after the end of the VAT period. Late returns build up penalty points, and late payments attract penalties and interest, so a missed deadline costs more than it used to.
Specialist VAT support for the motor trade covers the routine work of preparing and checking returns as well as the decisions that sit behind them: whether to register, which accounting scheme suits you, how to treat a particular vehicle and what to do when you find a mistake in an earlier return.
What VAT support can include
Help is shaped around the way your business buys, sells and records its work.
- Quarterly VAT returnsPreparing or reviewing each return from your bookkeeping records, checking the figures make sense against the quarter's trading, and submitting through MTD-compatible software.
- Registration decisionsWorking out when you must register, based on your taxable turnover against HMRC's current threshold, and whether registering voluntarily earlier would help or hurt.
- Choosing a VAT accounting schemeComparing standard accounting with cash accounting, annual accounting and the flat rate scheme. Businesses with high stock and parts costs often find the flat rate scheme a poor fit.
- Cars, vans and input taxInput VAT on a car is usually blocked unless it is used wholly for business, such as stock held for resale. Commercial vans are treated differently, and getting the line right matters.
- Finance commission and add-onsCommission for introducing customers to finance is usually exempt, while many add-on products are standard-rated. Exempt income can affect how much input tax you recover, so it is checked.
- Manufacturer bonuses and incentivesBonuses and support payments from manufacturers or suppliers may be consideration for a supply or a discount on purchases. The answer changes the VAT, so each arrangement is reviewed.
- Correcting earlier errorsDeciding whether a mistake can be corrected on the next return or needs a separate disclosure to HMRC, and preparing the figures either way.
What to plan before handing over your VAT
A little preparation makes it far easier to get the returns right from the first quarter.
Your VAT period dates
Know your stagger, the months your VAT quarters end. Changing your accounting year end to line up with it can make year-end work simpler.
Your software
Check that your bookkeeping software or dealer management system can produce MTD-compatible records and digital links between them, rather than figures copied by hand.
Your income streams
List everything the business earns: labour, parts, vehicle sales, MOTs, finance commission, rental, recovery. Each may have a different VAT treatment.
Earlier returns
Have recent returns and HMRC correspondence ready. If you suspect an earlier return was wrong, say so early, because corrections are easier when found quickly.
Good to know
Penalty points
Each late return adds a penalty point, and a financial penalty follows once you reach the threshold for your filing frequency. Points expire after a period of compliance.
Fuel for private use
If the business pays for fuel in a car that is also used privately, the fuel scale charge may apply, or you may choose not to reclaim the fuel VAT at all.
Bad debt relief
If a customer never pays, VAT already paid to HMRC on that invoice can usually be reclaimed once the debt is six months overdue and written off in your records.
The limited cost trader rule
Flat rate scheme users who spend very little on goods must use a higher flat rate. Labour-heavy motor businesses, such as mobile mechanics, should check whether this applies.
How it works
- 1
Send an enquiry
Tell us what your business does, whether you are already VAT registered and what you need help with.
- 2
Talk it through
A specialist calls to understand your income streams, your software and how your returns are prepared now.
- 3
Review the current position
Recent returns and records are checked, and any errors or missed reclaims are explained, with what to do about them.
- 4
Each quarter after
Returns are prepared or reviewed on a timetable that suits your VAT periods, with questions answered as they come up.
Motor trade VAT questions
When do I have to register for VAT?
When your taxable turnover over the previous twelve months goes above HMRC's registration threshold, or you expect it to in the next thirty days alone. Check HMRC's current figure, as it can change.
Can I reclaim VAT on a car for the business?
Usually not, unless the car is used wholly for business and not available for private use, or it is stock bought for resale. VAT on vans and other commercial vehicles can normally be reclaimed.
Is VAT charged on finance commission?
Commission for arranging credit for a customer is generally exempt from VAT. Having exempt income can limit how much input tax you can recover, so it is worth checking.
Do I have to use Making Tax Digital for VAT?
Yes. All VAT-registered businesses must keep digital records and file returns using compatible software, unless HMRC has agreed an exemption.
Is the flat rate scheme a good idea for a garage?
It depends on how much you spend on parts and goods. Businesses with high stock costs often pay more VAT under the flat rate scheme, so compare it with standard accounting before joining.
Who deals with my VAT enquiry?
A qualified accountant who works with motor trade businesses will be in touch to discuss your VAT.
Get your VAT in order
Tell us a little about your business and your VAT returns, and a specialist will be in touch to talk about the help you need.