Legal Article - VAT

What is a Write Back?

It is common practice to offer a prospective customer an over-generous price for part exchange vehicles to such an extent that a profit cannot be made on the subsequent sale. No credit for VAT is allowed.

However if you follow the ‘Write Back’ procedure below you may be able to reduce the VAT loss.

Example:
 

Car Purchase Price

£3500

Advertise the Car for Sale

£4500

 
 
A customer brings in a part exchange vehicle worth £500 for which you offer £1000

The original deal is:
 

Car Sold

£4500

Part Exchange

£1000

Payable

£3500

Profit on Sale

£1000

 
By writing back both prices by £500, the amount payable remains the same, but the VAT loss is reduced:
The revised deal is:
 

Original Price

£4500

Special Discount

£500

Car Sold

£4000

Part Exchange

£500

Payable

£3500

Profit on Sale

£500

 
IMPORTANT
1. Do get the customer to agree to the revised prices by signing the Sales Invoice.

2. Do ensure the finance document price and the invoice prices are identical.

(Applicable where the part-ex vehicle constitutes deposit for a finance deal)

3. Don’t amend invoice prices after the sale and don’t enter different figures on your sales invoice to those on your finance documents or you will run the risk of being fined by Customs & Excise.

Published: 21 Mar 2011

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