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Free of Charge Warranty

30th May 2010

If a motor trader gives their customers free of charge warranty, (usually as part of a vehicle sale), his customer pays no IPT. The supplier of the warranty recovers IPT at 6% (standard rate) from the motor trader.

Free of Charge Example:

Selling price to customer = £0.00 – IPT cost to customer = £0.00 Cost price to trader = £100.00 – IPT cost to trader = £6.00 (paid to warranty supplier)

As you can see, IPT is not straightforward to comprehend. DragonDMS makes this complex sum as easy as possible for you. As long as you enter both the cost price  and the selling price of the warranty, DragonDMS will calculate the IPT correctly for you. To find out more about IPT, visit the HMRC IPT

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