Meaning of 'repossessed goods'
It has been held1 that the term 'repossessed' applies not only to a case of repossession following default by the purchaser under a conditional sale or hire purchase agreement, but also where the goods are returned voluntarily. HMRC has accepted the decision of the High Court, and has set out the circumstances in which an overpayment of output tax (ie tax accounted for on the sale of the repossessed goods) may be reclaimed2.
The effect of the GMAC decision, in conjunction with the 'de-supply' rules set out below, was that the amount of output tax on the first sale was reduced, and no output tax was accounted for on the second sale. As a result, measures were introduced in the 2006 Budget which disapply the 'de-supply' rules where the repossession of cars, second-hand goods, works of art, antiques and collectors' items sold under a conditional sale or hire purchase agreement has led to a reduction in the output tax accounted for on the original supply.
The transactions described below are treated as supplies of neither goods nor services, and are thus outside the scope of VAT, by virtue of orders made under VATA 1994, s 5(3).