Weekly VAT update – 2 May 2017
MOT where the garage was not authorised to carry out MOTs
In this case, HMRC raised assessments on the appellant on the basis that its charges for MOTs were not itemised on its invoices and were therefore subject to VAT.
The appellant repairs and services cars but, in the relevant period, was not an authorised MOT garage and continued its MOT work by using the services of an approved MOT test centre. Customers were invoiced as if the appellant was still an authorised garage, and no VAT charged on the MOT fee – although the MOT charge is not disclosed as a separate amount on the sales invoice.
The appellant advertised the fact that it was the cheapest garage in the area for MOTs, with an MOT costing £49.95. There was an advertisement on the front of the building in big letters and numbers. The appellant had an arrangement with a number of garages in the area, and the cost to the appellant of an MOT ranged between £40 and £54.85. Obviously, the appellant made a loss on some of the MOTs. It was prepared to sustain the loss, partly because it had optimistically, but erroneously, thought that the period when it was not an authorised MOT garage would be very short, and because it wished to retain the customer base. Part of the appellant’s argument was that it looked at HMRC’s notice in advance of not charging VAT on the MOT element of their supply, and that there was nothing in the notice to indicate that they should. The Tribunal referred to several similar cases that had been decided in favour of the taxpayer, and for not dissimilar reasons, and none was appealed by HMRC.
The Tribunal said that it had no doubt that every customer knew that the appellant itself could not supply an MOT test. Each customer knew that the appellant would have to ferry the car in question to and from the authorised garage, perhaps more than once. It found that the appellant acted as agent for the car owner. The terms of the invoice did not show the involvement of the second garage, but the customer did not need to know the identity of that garage – only that an authorised garage would do the test, which they did. The Tribunal therefore allowed the appeal against HMRC’s assessments.