Retailers who have made Dealer Deposit Contributions (DDC) – not to be confused with a Manufacturer Deposit Contribution – in the last four years may qualify for a VAT refund.

A new brief from HMRC has cleared up confusion around the issue as different retailers had different VAT accounting treatments. HMRC has now ruled that this contribution payment is effectively a discount on the headline price of the car so VAT is only payable on the lower amount.

Dealerships accounting for VAT on the full sale price of the car may have accounted for additional output VAT and could claim this back from HMRC.