By Nick Lanigan, Tax Assistant Manager
The automotive sector is once again in HMRC's crosshairs as dealerships across the UK are being targeted, and subsequently investigated, for suspected tax evasion.
According to HMRC, the automotive sector underpaid £444.2 million in tax in 2021-22. This is a significant amount of money, and it is clear that HMRC is determined to recover it, potentially putting many dealerships at risk and creating undue stress and worry.
As a motor dealer, it's important to be aware of the risks and take steps to mitigate them. The automotive sector is receiving a mass of unwanted attention with the number of investigation notifications being served but it is important to co-operate as the penalties for non-compliance can be severe.
The pandemic saw HMRC’s forces redeployed to investigate abuses and errors on things like, furlough payments and other Covid support schemes. During this time, we saw a noticeable absence of investigations raised on VAT, PAYE and Corporate Tax matters. With these schemes no longer active, we have seen HMRC raise several investigations into clients in the past few months.
It is important to remember during a resurgence of HMRC enquiries that the mere act of selling cars puts you on HMRC’s radar and that it does not necessarily mean you have been doing anything untoward. Quite simply, cars are expensive and subject to complex rules for businesses buying and selling them. The provision of fuel and company cars creates an additional front for HMRC to explore for potential errors.
There are also some exceptional activities that create a risk of drawing HMRC’s attention, which include transition to a new DMS, property transactions, business acquisitions and VAT returns with large repayment claims.
If, over the last few years HMRC has not visited your dealership, it is more likely to happen now. We have recently assisted a client with their first HMRC enquiry after a decade without any attention. There had been no unusual activity or transactions to merit the visit and when the visit occurred it was blissfully uneventful, however, this was because we were on hand to deal with HMRC and challenge anything that we felt was not part of their original investigation.
The automotive sector is a vital part of the UK economy, but it's also a target for HMRC. By following the tips listed above, we can help you protect your business from tax investigations and penalties. We can help deal with HMRC saving you time, cost, worry and stress, giving you peace of mind.