Are MOTs tax exempt?

kellyb

I wonder if anyone can help. Can a car repair garage that is not vat registered deduct MOTs off to get there turnover down? Also dose this include work done on the cars that failed their MOT or just the price of the MOT its self! Also are MOTs VAT exempt? Its just what someone told me today and its confused me a little I wonder if someone can shead light on it. Thanks,

MarieNoelle

MOTs are outside the scope of VAT so excluded from the turnover for VAT threshold. I would however expect any repair/service to be a taxable supply.

MarieNoelle

Is the garage MOT registered or do they subcontract MOT?

kellyb

Thank you for the reply MarieNoelle, the garage takes the car somewhere else for the MOT and then it takes it back to the garage and dose any repairs needed etc. It charges the customer the cost of the MOT and then any repairs needed. So I guess they could deduct the cost of the MOT from their annual turnover but not the costs of any repairs associated with the MOT

MarieNoelle

Indeed, if the garage recharges to the customer the MOT at cost it would be considered a disbursement so not VATable.

NeilH

MarieNoelle said:

Indeed, if the garage recharges to the customer the MOT at cost it would be considered a disbursement so not VATable.

Does the owner know/agree to the vehicle having the MOT elsewhere/it's not part of the main service? If not and if I were HMRC, I would be challenging that assumption as it seems a supply of service could have taken place between the garage in question and the vehicle owner, the garage has simply hired a sub-contractor to do the work.

https://gov.uk/vat-costs-or-disbursements-passed-to-customers stipulates the conditions of a disbursement.

If it is a genuine disbursement then exclude, if it's simply sub-contracted then include.

MarieNoelle

You are absolutely right @NeilH I had overlooked the fact that all 8 conditions for disbursement had to be met.