How Can A Paragraph Generator Help With...
News1 min ago
v a t query
12 Answers
Can anybody tell me if M O T's are Zero rated or exempt? What is the difference. Thanks for advice. Cyrilbiker
Answers
1 to 12 of 12
Best Answer
No best answer has yet been selected by cyrilbiker2. Once a best answer has been selected, it will be shown here.
For more on marking an answer as the "Best Answer", please visit our FAQ.
The difference between a service being zero rated for VAT and one that is exempt, is that zero rated means that VAT is applied at 0%, exempt means it is isn't applied at all. In practical terms this might not appear to make a blind bit of difference but I understand it supports several million accountants in their jobs.
Isn't it that if you provide an entirely exempt service you don't have to register for VAt, or, therefore, make VAT returns? If you provide a zero rated supply then you have to make a return.What fun that causes. Remember the nonsense about whether Jaffa cakes were cakes or biscuits ? One attracted VAT and one didn't , so a supplier of cakes would charge VAT on everything apart from Jaffa cakes (or not) ?
MoT's are EXEMPT from VAT.
The difference relates to the ability of a VAT registered business to reclaim VAT on its expenditure. If something is zero rated then it is charged VAT at 0%. In effect there's no VAT added at point of sale but you can reclaim the VAT charged to you on your expenses in running the business. If something is EXEMPT it is outwith the scope of VAT and you can't claim any VAT back on your costs.
Of course in practice pretty much every business that does MoT's also does motor repairs which are normally vatted so they'd get all their expenses allowed for VAT against that part of the business.
The difference relates to the ability of a VAT registered business to reclaim VAT on its expenditure. If something is zero rated then it is charged VAT at 0%. In effect there's no VAT added at point of sale but you can reclaim the VAT charged to you on your expenses in running the business. If something is EXEMPT it is outwith the scope of VAT and you can't claim any VAT back on your costs.
Of course in practice pretty much every business that does MoT's also does motor repairs which are normally vatted so they'd get all their expenses allowed for VAT against that part of the business.
VAT on an MOT Test is outside the scope of VAT. This means VAT is not charged at all. Zero rated means that VAT is charged at Zero rate. Exempt means that the item is not outside the scope of VAT but that no VAT is charged. This seems to suggest that there is no difference but when you prepare your VAT return you cannot reclaim input VAT from your suppliers in full if you have Exempt outputs so that for instance Insurance companies cannot reclaim VAT in full. Zero rated and outside the scope charges do not have this effect. This is a nice earner for the Treasury.
Just to add to the confusion, if you ask a garage to get your car MOTed for you, and that garage is not an MOT station so takes the car to an MOT station, the garage will have to add MOT onto your final bill (irrespective of whether it charges you labour to drive the car to the station). It is because it is supplying you a service - that of getting your car MOTed.
Not true in all cases
If a garage is not an approved test centre, it may arrange for a vehicle to be tested elsewhere as part of its service to the vehicle�s owner. Where the unapproved garage shows the exact amount charged by the test centre separately on its invoice to its customer, and meets all the other disbursement conditions, it may treat the MoT element as a disbursement and outside the scope of VAT.
The unapproved garage will, however, have to account for VAT on the full amount of the invoice if it chooses not to treat the amount charged by the test centre as a disbursement, does not satisfy all the disbursement conditions, or makes a profit on the MoT transaction.
If a garage is not an approved test centre, it may arrange for a vehicle to be tested elsewhere as part of its service to the vehicle�s owner. Where the unapproved garage shows the exact amount charged by the test centre separately on its invoice to its customer, and meets all the other disbursement conditions, it may treat the MoT element as a disbursement and outside the scope of VAT.
The unapproved garage will, however, have to account for VAT on the full amount of the invoice if it chooses not to treat the amount charged by the test centre as a disbursement, does not satisfy all the disbursement conditions, or makes a profit on the MoT transaction.
Unfortunately there have been cases where exempt items have become standard rated and thus brought into the scope of VAT - I refer in particular to the Severn Bridge Toll charge. In addition as the 0% is in effect a rate of Value Added Tax certain items can then also be converted to the standard 17.5% by the powers that be!
Interesting Kempie - this charge happened to me. The approved garage owner (whom I trust) claimed that HMRC had forced him to account for the VAT on the supply of this service, he had lost out several hundred pounds on back VAT. He now thus charges VAT on this service.
The moral is, to be sure of avoiding paying VAT, go direct to an approved MOT centre.
The moral is, to be sure of avoiding paying VAT, go direct to an approved MOT centre.
Thanks to all who posted an answer. Your advice has been very helpful. I now have a better understanding of the points I raised. Really great o get so much help so quickly. I did try the official website but what a minefield compared to how easliy it has been explained here. Very best regards to all.
1 to 12 of 12
