The case of Richard J Finney v HMRC [2015] TC04667 has highlighted the importance of understanding how the sale of an MOT certificate with a second hand car should be treated for VAT purposes.

Mr Finney had incorrectly calculated the margin on some of his sales by deducting the costs of MOT tests, but his helpful attitude and well-kept records enabled him to escape penalties and minimise his additional VAT liability.

The sale of a second hand car with an MOT test is generally treated as a single supply.  The sum attributable to the MOT certificate is therefore not deducted from the sales price when calculating the margin.

Mr Finney had wrongly treated the MOT tests as disbursements and excluded them from his margin in about 30% of his sales.

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Case reference: Richard J Finney v HMRC [2015] UKFTT TC04667

See our Margin Scheme guide for a more detailed consideration of the case and guidance on the second hand goods scheme.