HMRC / DVLA collaborate to prevent VAT evasion on Vehicles imported into UK

HMRC have joined forces with the DVLA in an attempt to stop businesses who bring vehicles in to the UK evading VAT.

The “NOVA” System

The new “NOVA” system will now enable the DVLA to check if a VAT registered business has notified HMRC  when the business brings vehicles in the UK, before they register the vehicle. The NOVA system will replace the old manual checking system in which HMRC claim cost the exchequer £110 million per year of VAT fraud resulting from vehicles being brought in to the UK.

When to notify HMRC

The rules stipulate that a VAT registered business should notify HMRC of all land vehicles that are brought in to the UK permanently within 14 days of the vehicle arriving in the UK. These vehicles include cars, racing cars, motorcycles, tractors, mopeds, fork lift trucks, golf buggies, bulldozers and even in some instances children’s motorcycles.  In other words all vehicles that have an engine or a cylinder capacity of 49cc or more should be notified to HMRC before the vehicle is registered with the DVLA.

When to pay the VAT

As to when the VAT should be accounted for depends on where the vehicle is purchased from. If the vehicle is purchased from within the EU then the VAT must be accounted for in the next VAT return. If the vehicle is purchased outside of the EU, the VAT (along with any other duties) must be accounted for at the time the vehicle is imported in to the UK.

We anticipate that the DVLA will refuse to register some vehicles on the basis that HMRC have not been notified of the vehicle and that the VAT has not been accounted for. In addition we anticipate that HMRC will raise VAT assessments in relation to the unpaid VAT which may include penalties (which is currently £5 per day for each day that the notification is late).

If you have received a VAT assessment in relation to vehicles being brought in to the UK, please contact us immediately so that our specialist legal advisers can assist you in relation to any VAT liability and penalties arising from the assessment. Our tax dispute lawyers will be able to advise you on whether there are prospects for appealing HMRC’s decision to the First-tier (tax) Tribunal along with considering other dispute resolution methods available to you.