Introduction
For used car dealers and independent forecourts, Month-9 (the ninth month of your financial year) is the most important tax milestone — and yet it is one of the most commonly overlooked.
By Month-9, you have sufficient trading data to forecast your tax position with accuracy, identify risks early, and take action to protect cashflow well before year-end pressure begins.
At Hammond & Co, we see a clear pattern every year:
- Dealers who review their numbers at Month-9 consistently reduce tax exposure, manage cash more effectively, and avoid year-end surprises.
- Dealers who do not often face unexpected tax bills, avoidable liabilities, and cashflow strain in Months 12 and 13.
This article explains why Month-9 matters, what HMRC focus on, and how used car dealers can take control of their tax position before it is too late.
The Reality for Motor Dealers at Month-9
By Month-9, most dealers begin to feel pressure building.
A common reality is this:
“We’ve had a good year, but once VAT, wages, stocking fees and reconditioning are taken into account, it’s hard to know what the real profit is until the accountant finalises the year-end accounts.”
This is precisely why Month-9 planning is critical:
- Over 75 percent of the trading year is already complete
- Profit trends are visible — both positive and negative
- There is still time to correct course
- Cashflow can be stabilised ahead of year-end
- Corporation tax can still be reduced legitimately
- The risk of a Month-13 tax shock is significantly reduced
Month-9 is the point where proactive dealers gain control and reactive dealers lose it.
Why Year-End Alone Is Not Enough
Many dealers wait until after Month-12 for their accountant to calculate the outcome. By then:
- Stock decisions are already fixed
- Reconditioning spend has already occurred
- Dividends may have been taken at the wrong time
- Profit is final, and tax is locked in
- There is no opportunity to act
Year-end accounts reflect history.
Month-9 planning allows you to influence the outcome.
Common Tax Risks for Dealers at Month-9
Used car dealerships face specific risks due to the interaction between stock, finance, VAT and reconditioning. The most frequent issues we encounter include:
Profit Higher Than Expected
Without accurate profit-per-vehicle tracking, margins are often underestimated, leading to unexpectedly high corporation tax bills late in the year.
Stock Valuation Errors
Incorrect stock values distort profit figures and can artificially inflate taxable profits.
Unallocated Reconditioning Costs
Significant reconditioning spend is often absorbed into general overheads rather than allocated to vehicles, masking true profitability until year-end.
Dividends Taken Without Planning
Early or excessive dividend withdrawals can result in higher personal tax or illegal dividend positions.
VAT Margin Scheme Inaccuracies
Errors in margin records can mean VAT has been incorrect throughout the year. Correcting this late is costly and stressful.
Why Cashflow Tightens in Quarter 4
Even profitable dealers frequently experience cashflow pressure in Months 10–12 due to:
- VAT liabilities falling close to year-end
- Seasonal slowdowns in vehicle turnover
- Increased winter operating costs
- Multiple finance settlements occurring together
Without Month-9 planning, these pressures compound rapidly.
What HMRC Focus on for Motor Dealers
Motor traders receive increased scrutiny due to industry-specific risks, including:
- VAT Margin Scheme compliance
- Stock valuation accuracy
- Missing or incomplete purchase invoices
- Mixing of personal and business expenses
- High cash turnover
- Inconsistent margins
Month-9 provides the opportunity to strengthen:
- Stock records and valuations
- Margin documentation
- Part-exchange evidence
- Reconditioning allocation
- VAT reconciliation
- Bank and control account accuracy
These steps materially reduce the risk of HMRC enquiries.
Key Actions Dealers Should Take at Month-9
Proactive dealers use Month-9 to take control of the final quarter.
1. Review Year-to-Date Performance
- Confirm profit per vehicle accuracy
- Reconcile stock values
- Compare margins to prior periods
2. Review VAT Margin Scheme Accuracy
- Identify and correct errors from earlier quarters
- Ensure full documentation exists for each vehicle
3. Analyse Reconditioning Spend
- Allocate costs to individual vehicles
- Identify creeping overheads
4. Review Director Withdrawals
- Ensure dividends align with available profits
- Avoid unnecessary personal tax exposure
5. Plan Corporation Tax Early
- Estimate likely tax liability
- Begin setting funds aside monthly
- Avoid last-minute payment pressure
6. Update Cashflow Forecasts
A rolling 12-month forecast at Month-9 helps with:
- Identifying early-year cash pressure
- Managing VAT and payroll
- Planning stock purchases
- Smoothing cash peaks and troughs
Tax Planning Strategies Available at Month-9
Month-9 is the final point where meaningful, measured tax planning can take place.
Stock Valuation Review
Correctly valuing slow-moving or impaired stock can significantly reduce taxable profit.
Proper Allocation of Reconditioning Costs
Ensures profits are not overstated and tax is not inflated.
Timing of Expenses
Planned expenditure can be accelerated or deferred to smooth taxable profits.
Capital Allowances Planning
Strategic timing of equipment, tools and IT purchases can reduce corporation tax through available allowances.
Salary and Dividend Optimisation
Ensures withdrawals are tax-efficient and legally compliant.
Pension Contributions
Corporation tax-deductible pension contributions can extract profit efficiently while building long-term wealth.
Staff Bonuses and Incentives
When structured correctly, bonuses can reduce taxable profit and support staff retention.
Case Study: Month-9 Tax Reduction in Practice
An independent used car dealer approached us during Month-9 following a strong summer trading period.
Our review identified:
- Overstated stock valuations
- Reconditioning costs not correctly allocated
- An inefficient salary and dividend structure
- VAT margin errors from earlier quarters
By addressing these issues at Month-9, we:
- Corrected stock values
- Reallocated reconditioning costs
- Restructured director remuneration
- Rectified VAT margin inaccuracies
- Brought forward essential capital expenditure
The result was an estimated corporation tax reduction of £11,800, without disrupting operations or cashflow.
Month-9 Dealer Tax Checklist
Profit
- Review year-to-date performance
- Confirm profit per vehicle
- Compare margins year-on-year
Stock
- Reconcile stock records
- Review valuations
- Address slow-moving vehicles
VAT
- Confirm margin scheme accuracy
- Identify errors from earlier quarters
- Ensure supporting documentation is complete
Reconditioning
- Allocate costs correctly
- Review subcontractor invoices
Director Remuneration
- Review salary and dividend mix
- Prevent overdrawn loan accounts
Tax Planning
- Review capital allowances
- Consider pension planning
Cashflow
- Update forecasts
- Identify pressure points
- Set aside tax provisions
If any of these areas are unclear, a Month-9 review is overdue.
Take Action Before HMRC Does
Dealers who ignore Month-9 planning often face:
- Unexpected tax bills
- Cashflow crises
- Overdrawn director loan accounts
- Missed tax-saving opportunities
- Increased HMRC risk
Dealers who plan at Month-9:
- Reduce tax exposure
- Improve cashflow
- Strengthen compliance
- Make informed business decisions
If your accountant does not provide proactive Month-9 planning — or lacks specialist motor trade knowledge — you are entering year-end without visibility.
Contact Hammond & Co to discuss a Month-9 review and take control of your year-end position.