VAT Tribunal – Second Hand Margin Scheme
In a recent Tribunal Case the taxpayer appealed against an HMRC assessment for over £73k which related to sales of second hand cars from a second hand car dealership. The taxpayer contented that he was entitled to use the second hand cars margin scheme. This permits the VAT to be calculated using profit margins rather that based on the traditional VAT calculation.
Following a routine VAT inspection, HMRC were of the opinion that the record keeping conditions necessary to use this scheme were not met and an assessment was issued. Whilst the taxpayer and his accountant accepted that some errors had been made they reconstructed their accounts with permission from HMRC. However the reconstructed accounts were not to the satisfaction of HMRC.
The Tribunal found that HMRC were acting correctly in issuing an assessment and dismissed the appeal. In an interesting final comment the Chairman considered whether the appeal was in fact an appeal against HMRC’s rejection of the ‘reconstructed’ accounts. Whilst questioning the jurisdiction of the Tribunal to deal with such matters he also stated that he would have dismissed an appeal on these grounds.