The Retail Motor Industry (RMI) is lobbying the government to close a tax loophole exempting insurers from paying VAT on labour in their own vehicle-repair centres.

The RMI points out that the presence of insurer-owned bodyshops may disadvantage other vehicle repairers and smaller insurance companies without the capital to fund a body-repair operation.

The RMI is the bodyshop trade organisation. Chairman Bob Hood said the VAT loophole saved about 8% off every invoice, and the Treasury estimated it lost £9m revenue a year because of it.

“Those insurers who open their own shops, in direct competition to commercial operations consider the VAT advantage to be extremely important,” he said.

Meanwhile, the 2001 Sewells bodyshop opinion survey has found that bodyshop repairers would like more reliable contracts, flexibility on opinion times and faster settlement of accounts.

Figures show the body repair market experienced almost no growth from 1999 to 2000, standing still at £5.1bn. Higher insurance excesses, speed restrictions leading to fewer accidents and an increase in write-offs, because of falling used-car values, have all slowed the market.

Regional inequities in insurance labour rates were a major issue. Bodyshops inside the M25 earned 46% more than in Northern Ireland, for example, yet insurance labour rates were only 12% more.

Bodyshop numbers continue to decline, reducing from 10,095 in 1999 to 9,278 in 2000.

A total of 578 respondents were involved in the survey, which was conducted by a postal questionnaire and follow-up phone interviews.