Ask ten garage owners how VAT works on MOTs and you'll get ten different answers. It matters: get it wrong and HMRC can assess you for 20% VAT on every MOT you've put through the books — going back four years. The good news is that the rules are clear once you separate the two situations: garages that are approved test centres, and garages that send MOTs out to a test centre.
The Basic Rule: MOT Fees Are Outside the Scope of VAT
An MOT test is a statutory inspection. When an approved MOT test centre charges for a test at or below the statutory maximum fee (currently £54.85 for a car — see the official table of MOT test fees on GOV.UK), that charge is outside the scope of VAT. No VAT is charged, and the MOT fee does not count towards your £90,000 VAT registration threshold.
Note the wording: outside the scope, not "exempt" or "zero-rated". The fee simply isn't a VATable supply at all, provided it doesn't exceed the statutory maximum.
Garages That Are Approved Test Centres
If your garage holds MOT testing authorisation, life is simple:
- Charge up to £54.85 per car test — no VAT
- Show the MOT separately on the invoice from any repair work
- Any repairs, parts and retest work are standard-rated at 20% as normal
If you charge more than the statutory maximum, the excess is consideration for a taxable service and VAT is due on it.
Garages That Subcontract the MOT — Where It Goes Wrong
Most VAT problems happen at garages without testing authorisation, which take the customer's car to an approved centre. Suppose the test centre charges you a discounted trade price of £40 and you charge your customer £54.85. How the difference is treated depends on how you structure the recharge. HMRC's position is set out in its internal guidance at VTAXPER68500 and the disbursement rules in VAT: costs or disbursements passed to customers.
Option 1 — Recharge at Exact Cost (Disbursement)
If you act as the customer's agent, the test centre's invoice is effectively for the customer, and you pass the fee on at exactly what you paid — no markup, the recharge can be treated as a disbursement: outside the scope of VAT. You must show it separately on your invoice and keep evidence of what the test centre charged you.
Option 2 — Recharge With a Markup
If you pay the test centre £40 and charge the customer £54.85, you have two choices:
- Show the invoice as £40 MOT (outside the scope) + £14.85 service charge — VAT is due on the £14.85 arrangement fee (it's VAT-inclusive, so about £2.48 of it is VAT); or
- Bundle it as one £54.85 charge — in which case HMRC's view is that the whole amount becomes consideration for your own taxable supply, and VAT is due on all of it.
That second outcome is the expensive trap. Garages that quietly pocket the trade discount without separating the charges are the ones that get caught at a VAT inspection.
Practical Checklist for Your Invoices
- Always show the MOT fee as a separate line, never merged into "service & MOT"
- If you subcontract: recharge at exact cost, or split out your arrangement fee and account for VAT on it
- Keep the test centre's invoices — they are your evidence at inspection
- Remember MOT income at or below the statutory fee does not count towards the VAT registration threshold — relevant if your garage is hovering near £90,000
Talk to Someone Who Knows Garages
At SMD Accountancy we work with garages and mobile mechanics on VAT registration, invoice structuring, the Flat Rate Scheme and the margin scheme for used vehicle sales. If you're not sure your MOT recharges would survive a VAT inspection, get in touch — fixing it now is far cheaper than a four-year assessment later.