Car dealers still under intense scrutiny for cross border purchases from the UK

Nick Ryan — Fri, 11 Mar 2016 12:43:14 +0000

This investigation continues to make strides and, based on the reports we have received, continues to reap significant rewards for Revenue. The approach is the same, and it is important for dealers to understand the developments of this investigation and the need to address matters in order to avoid the strong possibility of losing their business.
Revenue’s focus is narrow, but clear. Their investigation focuses on motor dealers who purchased cars from UK dealers or UK auction houses between 2009 and 2014 and, where the sale was managed under the margin scheme. The gist of their evidence is based on one document, the UK V5 vehicle registration document and supported by information provided under the VAT Information exchange System (VIES). Following this initial exercise, Revenue has also identified other errors in VAT accounting and reporting for other types of vehicles purchased from the UK which are leading to significant assessments.
The aim appears to quickly identify an error in one year and look for a settlement of the VAT arising on the understanding that the investigation will not be extended to other years. In other words, it is like offering a much reduced custodial sentence for accepting guilt without conviction as opposed to proving the case which could result in a much longer and more severe sentence.
In my time with HMRC as a VAT control officer we were often preached by our seniors that to raise an assessment for the correction of an error then we had to provide the evidence to support the findings, just saying it was wrong was not good enough. Without sufficient evidence then the case could not be supported.
To date, my one leading question is “Where is the evidence?” Does a UK vehicle registration document or, an entry on an VIES declaration provide for sufficient evidence, if any, that VAT was reclaimed by the person who purchased the vehicle when new or, that there was an entitlement to deduct the VAT by that person? If the shoe was on the other foot, would Revenue accept that a transaction occurred which allowed for a deduction of VAT based on a document that was not an invoice?
If the motor vehicles did not qualify as a margin scheme car then should not the UK dealers be submitting sizeable claims for VAT incorrectly accounted for on the sale?
The Revenue decline to answer these questions and, for me, this is a disappointing situation as should a tax authority openly flaunt the procedures and legislation in place for the sake of collecting additional revenue?
The question arises as to whether this is an Irish VAT matter. Taking the number of vehicle sales being challenged by Revenue which suggest, under Revenue’s interpretation, that the majority of purchases made do not qualify as margin scheme cars, then this looks tantamount to a fraudulent exercise conducted by a number of UK dealers and auction houses. Why has Revenue not referred its findings to HMRC on this basis? HMRC guidelines provide for no definition of fraud though determine that fraud and fraudulent conduct includes, in its various forms, falsification with an intention to deceive. Given the number of vehicles identified it is questionable, if this is not fraud, that UK dealers and auction houses have got this so incredibly wrong.
The VAT Practice, following our submission to HMRC, has received a positive response which support our view that Revenue’s approach is flawed. To this extent we are preparing a case, based on HMRC’s response to our submission, which we believe provides for a very strong counter argument in defending a dealer’s position and should provide for a positive result for dealers with assessment/settlements being quashed.
If you are acting for a motor dealer currently under investigation, or who has been investigated and where Revenue has issued a assessment, or a settlement has been agreed then please contact us as we believe we can provide your client with a strong argument to negate Revenue’s case.
For assistance in managing a Revenue investigation or, to discuss a particular case, then, please contact Nicholas Ryan at advice@thevatpractice.ie or, by telephone 023 8838181.

VAT Alert: Update on Revenue investigation of car dealers – assessments on the increase

Nick Ryan — Tue, 21 Jul 2015 15:51:03 +0000

Following on from our VAT Alert of 5 June 2015 there has been a significant acceleration by Revenue in their investigations into the motor industry. The focus is clearly set on those dealers who have purchased margin scheme cars from the UK, either directly from dealers or through auction houses. What is of concern is Revenue’s approach in determining assessments and the speed in which these assessments are being issued; in one case we are aware of, the assessment was issued within 24 hours of the audit inspection! Also, considering the levels of assessments raised it is interesting to note the paucity of information Revenue are relying on in determining their case. Revenue are taking a draconian approach in pursuing their investigations and this then presents the need for a different approach when challenging their stance and, in looking to resolve matters successfully for the dealer.
The crux of the matter appears to be one of interpretation, Revenue are challenging the use of the margin scheme by UK dealers and auction houses for sales of specific vehicles, notably those which may have been purchased by finance houses; dealer demonstrators appear to also be of interest.
What makes this different to other investigations is that the assessment arises from what Revenue perceive to be an error in accounting for VAT correctly on a supply made by a UK taxable person which provides them with the opportunity to assess for the VAT due on the end sale without any need to correct matters in the UK. As with intra EU transactions, where the supply qualifies as an intra-EU dispatch then the responsibility for accounting for VAT on the supply shifts to the purchaser hence Revenue’s stance that they have EU law to rely on and provides for an easy win assessment. Or does it?
From our understanding of Revenue’s approach it appears to be flawed.
Following discussions with a number of accountants and dealers The VAT Practice is not convinced this is the correct approach and we believe it can be countered successfully. To do so, UK VAT expertise is required. With over 20 years experience in practising in UK VAT, from HMRC to working within the big 4,which included expertise gained from advising on VAT motor industry issues, we believe we are best placed to assist dealers in resolving any Revenue investigation successfully and, in doing so, with a keen eye on cost.
For a nominal fee we can review the assessment and supporting paperwork in order to determine its correctness. Where we believe our approach can provide for a successful challenge then we are happy to proceed on a success fee basis.
To conclude, The VAT Practice does not believe that this is a matter that is to be resolved just under Irish VAT legislation. We also believe that Revenue’s approach is flawed and can be successfully challenged.
For assistance in managing a Revenue investigation or to discuss a particular case then please contact Nicholas Ryan at advice@thevatpractice.ie or 0238838181

The Vat Practice, Cork. Ireland » Revenue investigation into the motor industry

Car dealers still under intense scrutiny for cross border purchases from the UK

VAT Alert: Update on Revenue investigation of car dealers – assessments on the increase