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The automotive sector underpaid £444.2 million in tax in 2021-22, HMRC has reported.
As a result, dealerships across the UK could be targeted and subsequently investigated for suspected tax evasion.
Nick Lanigan, tax assistant manager for Armstrong Watson, said: “It’s important motor dealers are aware of the risks and take steps to mitigate them. The automotive sector is receiving a mass of unwanted attention with the number of investigation notifications being served but it is important to co-operate as the penalties for non-compliance can be severe.
“The pandemic saw HMRC’s forces redeployed to investigate abuses and errors on things like, furlough payments and other Covid support schemes. During this time, we saw a noticeable absence of investigations raised on VAT, PAYE and Corporate Tax matters. With these schemes no longer active, we have seen HMRC raise several investigations into clients in the past few months.
“It is important to remember during a resurgence of HMRC enquiries that the mere act of selling cars puts you on HMRC’s radar and that it does not necessarily mean you have been doing anything untoward. Quite simply, cars are expensive and subject to complex rules for businesses buying and selling them. The provision of fuel and company cars creates an additional front for HMRC to explore for potential errors.”