Concern as VRT refunds being issued on write-offs

Vehicle Registration Tax refunds are being issued to owners of cars which have been written off. The legislation, introduced largely at the behest of the motor trade in Ireland, was intended to make second-hand vehicles exported from Ireland more competitive in European markets, specifically Britain and Northern Ireland.

With the loading of VRT on to the wholesale prices of new Irish cars, it had been impossible to sell cars abroad at a going market rate without incurring a significant loss.

With the desperate need for car traders and private buyers alike to sell the unsellable during the recession, the VRT rebate scheme was introduced.

As with any tax-saving scheme, it seems often that it is the richest who benefit the most. Car history experts Cartell.ie recently flagged up the small but significant numbers of hugely expensive “supercars” being given VRT rebates as they leave these shores.

It is just about possible, depending on the demand for a specific model, to turn a profit by selling into the UK market and get the VRT back as well.

There is, it seems, a darker underbelly to this practice, though, and it is in the practice of selling cars which have been written off.

According to Cartell, 595 cars have so far this year been exported and granted a rebate of VRT, and of that number, the company suspects 10 were write-offs. That is on the face of it not a huge number, but the worry is that write-offs are not always visible in the records, and those 10 could just be the start of it.

"When we run these results for you, we have access to records, such as category C and category D write-offs, to which the Government would not necessarily have any visibility," John P Byrne, Cartell's legal and public relations manager, told The Irish Times.

“We consult the Motor Insurance Anti-Fraud and Theft Register for example . . . the Open Market Selling Price [OMPS – the notional value of a car around which all VRT calculations are made] would be hit significantly if it was valued as a previously written-off car, even a cat C or cat D, which are repairable write-offs.

“But is that factored into the calculation for VRT refund? I suspect it isn’t always factored in – how could it be if the Government doesn’t know – and it’s another reason for enactment of legislation to mandate all insurers to send write-off records to the Government – something for which Cartell.ie has been lobbying for years.”

Theoretically, the system for issuing VRT repayments is pretty tight. The OMSP of a car must be greater than €2,000 to start with and there’s a €500 administration fee, so the seller has to be pretty certain that they’re going to make back at least €501 before they get started.

There’s a good chance that it will be worth it, though – the average amount of VRT refunded is a not-inconsiderable €5,888. The vehicle has to be inspected at a National Car Testing Service centre (NCTS, operated on behalf of the Government by Applus) before export.

We asked Revenue for a run-down of exactly what checks it makes of both the vehicle and the owner before a refund is issued.

“There are robust checks in place to safeguard against such activity,” a spokesperson told us. “A vehicle must pass the ‘export examination’ and be registered in another member state before a repayment claim can be submitted for payment.

“A current vehicle registration certificate along with a current NCT certificate is required to be presented at the time of the export examination.

“The competent person as appointed by Revenue, is this case Applus, carries out the export examination on Revenue’s behalf. The vehicle VIN number is verified along with the mileage and condition of the vehicle are checked at the time of export examination is carried out. Also a valid NCT certificate is required before a vehicle can be exported.”

However, we further asked if any person had been prosecuted by Revenue for attempting to defraud or circumvent the system and the answer was a simple “not to date.”

That “not to date” and Cartell’s figures of at least 10 write-offs being granted VRT refunds does not seem to square. There are harmless explanations, such as that the written-off vehicles were high-value cars being exported to be broken for parts, but then that would seem to trip over the requirement that a car must be registered in the state of arrival.

Certainly in the UK, any car being imported must pass an MOT before it is registered.

The problem could simply be one of when the Government, any government, introduces a scheme that hands back money, those with a less than scrupulous bent will find ways to abuse it.