Suggestions that Ford car retailers could go out of business as the result of a Brexit-related change to the brand’s VAT invoicing have been branded as “scaremongering”.
Franchisees in the network will have to find around £750,000-per-site to fund VAT payments after Ford decided to make its retailers the ‘importer of record’, meaning that vehicles will be invoiced and funded net of VAT, with retailers only able to reclaim the funds when vehicle enter the UK.
One Ford retailer told AM that the changes – set to come into force in January – could be enough to force some retailers out of business in light of current economic difficulties resulting from COVID-19.
He said: “The VAT treatment applied by Ford so far has very much been a network advantage.
“We were able to use the VAT as a cashflow advantage and that has been to the benefit of franchisees and a huge boost to cashflow and there was no way that it could come and bite you so long as you didn’t spend it.
“There was always a risk that there could be a change. That’s been the case for 25 years and to suggest it has come as a shock is just not true.”
Foulds said that, by its nature, the Ford retail network – currently the subject of a slimming-down process which will lead to the loss of around half of its UK dealerships – was inherently strong, being operated by around six PLCs and 10 privateers.
He said that a reduction is stock across the network would sere to reduce the VAT issue and was already serving to lower retailers’ interest costs.
Foulds did concede that one or two franchised sites might “struggle” as a result of the VAT changes being made by Ford, but added: “That won’t be the only reason. That will be down to other factors, such as straightforward underperformance.”
TrustFord’s performance has been impressive since lockdown restrictions were lifted by its retail sites in June.
Yesterday the group reported that its pre-tax profits had risen by £5m year-on-year as it delivered 20,000 new vehicle sales between June and August.
In a statement issued to AM today (October 9), Ford said that it had been working with its retailers for several months to prepare them for its changing VAT policies.
“The UK’s post-Brexit transition period, ending in December, brings VAT changes and many other implications for businesses, and Ford has been reviewing invoicing and VAT procedures accordingly,” it said.
“We have been working with the dealer network for several months to ensure a good understanding of the changes and are working together with the network to minimise the cashflow impact, including individual dealer reviews to identify and support any liquidity concerns.”
In an analysis of the changes made after Vertu Motors chief executive, Robert Forrester, drew attention to them in the PLC’s latest trading update, ASE said: “Whilst Vertu Motors are clearly on top of this issue both from a management perspective and with a good set of results to fall back upon, others may need to look carefully at the impact and plan accordingly.”
It added: “As a rule of thumb, Ford dealers may have a cash flow reversal of about £750,000 per site (depending upon precise numbers) so the impact could be significant for those who don’t take notice of what Robert has written.”