The HM Revenue and Customs' (HMRC) willingness to challenge sales values used in VAT calculations has been highlighted in a VAT appeal judgement, according to ASE.

ASE’s tax director Michelle Malone said: “The N & M Walkingshaw case considered whether prior to 1992 an over allowance on a part exchange vehicle could be treated as a discount on the sale of the new vehicle. This would have led to a reduction in the amount of VAT that had to be declared by dealers in those years, and substantial refunds for a number of businesses standing behind the case.

“Unfortunately the appeal Tribunal upheld HMRC’s position, which was ‘that the part exchange valuation could not be linked to the sale of the new vehicle for VAT purposes’. Dealers will need to ensure that they make no adjustment in their VAT calculations for over-allowances.”

The ASE Tax team say they are aware of an increased number of VAT visits taking place this year and HMRC continue to look closely at transactions to ascertain whether the values used for VAT purposes remain consistent across all documents.

This is particularly true for finance transactions where many dealers have received VAT assessments when the finance sales value appears to differ from that shown on the invoice; value manipulation or ‘bumping’.