Regular readers of the trade and, indeed, national press will know that HM Revenue and Customs (Customs) have repaid hundreds of millions of pounds to the motor dealer sector over the past few years as a result of ‘Marks and Spencer’ claims for previously overpaid VAT.

The subject has received such exposure that it is hoped that it is unnecessary to go into detail in this article of the issues involved beyond repeating that the overpaid VAT related to margin sales and associated manufacturer discounts in respect of the sales of demonstrators (and, before 1993, courtesy and self-drive hire cars) between 1973 and 1996.

Despite the widespread publicity we regularly hear from dealer principals and finance directors who have still not submitted a ‘Marks and Spencer’ claim. It is still possible to submit a claim now and there is absolutely no downside in doing so. Many dealerships seem to have been wary of making a claim in case they were perceived as being unduly aggressive by Customs. If you have already made a claim in respect of the demonstrators you may well be eligible for the compound interest.

Dealers should ensure that they notify Customs immediately of their right to compound interest, although it is unlikely that this issue will be decided for some considerable time. If you have already made a claim in respect of the demonstrators you may well be eligible for the compound interest, please contact our Leading VAT Expert Ross Bartholomew on 01284 763311 or email him at

ross.bartholomew@bakertilly.co.uk