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GRT100456
Summary The law relating to the valuation
of supplies for VAT purposes is
complex especially where the
consideration paid is not, or is
not wholly in money.
In this case, the taxpayer tried to
argue that the difference between
the inflated trade-in value and the
real value of the part exchange
car was, in effect, a discount on
the sale of the new car and that,
as such, the taxable amount in
respect of the sale of the new car
could be reduced.
There would have been no
argument had the dealer given a
discount on the new car but, on
the facts of the case, this was not
the way that the deals were
structured.
24 March 2015
Value of supply of 'trade-in' car
The Upper Tribunal has dismissed the taxpayer's appeal in a case which centred
around the value, for VAT purposes, of the supply of a motor car where the dealer has
given the purchaser an 'over-allowance' in relation to his trade-in car. In the example
transaction before the court, the dealer gave the customer an 'inflated' or over-
allowance in relation to the car being traded in for a new one. The taxpayer argued that
the over-allowance was, in effect, a discount on the supply of the new car and that, as a
result, the amount of VAT due on the sale of the new car should be reduced to reflect
that discount.
Like the First-tier Tribunal (FTT) before it, the Upper Tribunal has dismissed the
taxpayer's appeal. According to the Tribunal, there is no scope for arguing that the
value of the replacement car is anything other than the price agreed by the parties.
The FTT had found as a fact that the over-allowance was part of the agreed price
for the part-exchange car and that the price for the replacement car was agreed
without any discount having been agreed in relation to it. Consequently, there is
no scope for treating the value of the new car as having been discounted.
According to the Upper Tribunal, once it is accepted that the open market value of
the sale of the new car must be assessed in the context of the actual transaction
concerned, the question is what amount of money a person at arms' length would
pay for the new car in the context of a part-exchange transaction which had
attributed an agreed price to the part exchange vehicle. The answer to that
question is that the amount payable depends on the amount of the agreed trade-in
price and it is immaterial whether or not it includes an over-allowance.
The value of the new car cannot be reduced by the value of the over-allowance.
N & M Walkingshaw Ltd v HMRC
Upper Tribunal
Case Alert
Contact Stuart Brodie Scotland [email protected] (0)14 1223 0683
Karen Robb London & South East [email protected] (0)20 772 82556
Richard Gilroy London & South East [email protected] (0)20 7728 3170
