VAT Bench-Marking

22nd December 2014

Motor Vehicle Garages and Furniture Retailers: Beware VAT Margin-Benchmarking
Have you received a letter from HM Revenue and Customs headed “transparent benchmarks”?.
Around 7,500 businesses engaged in the repair and maintenance of motor vehicles and in the retail sale of furniture are likely to receive these letters. The letters provide details of the anticipated relationships between the entries appearing in boxes six and seven of the trader’s VAT return, the VAT Mark-up ratio. The idea is to test whether publishing benchmarks for indirect taxes helps a taxpayer identify any mistakes they may have made on their VAT return and complete it correctly. The letter suggests that if the VAT Return does not reflect what HMRC expect then the trader should re-check his figures.

Because this is a controlled pilot exercise, not all businesses within the relevant sectors will be receiving a letter.  Those that do, should not read too much into it. HMRC state that they are expecting Motor Garages to have a ‘VAT Margin’ of between  27% and 82%. Statistically, such a wide target range surely makes a nonsense of this whole exercise?

Blog entry from: Jim Harrison. 

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