A VAT rebate of more than £17m helped double the half-year profits of car dealer Lookers.

The company was paid the money in respect of tax wrongly charged on demonstration cars up to 30 years ago.

Lookers, which is based in Manchester and has a Teesside outlet, has also benefited from the recent £31m acquisition of a motor parts business.

The company, which has more than 60 dealerships selling vehicles made by manufacturers including Renault, Vauxhall and Volkswagen, said a 16 per cent rise in used car sales and a 13 per cent increase in new car sales also contributed to a strong first half.

Pre-tax profits rose to £26.1m in the six months to June 30, from £10.3m. This included £16.75m from Customs and Excise, which was wrongly charged on cars between 1973 and 1996.

Lookers expects to receive at least £17.5m from the rebate, which was announced in May. The money will be used to reduce debt and fund its acquisition programme.

The group also said the recent purchase of FPS Distribution would boost its presence in the aftersales sector.

It said aftersales was an increasingly important component of motor retailing and that it was confident profitability in the division would continue to grow.

FPS, established in 1934, is the leading wholesale distributor of vehicle parts, with 19 distribution centres across the country.

Before goodwill and exceptionals, operating profits were eight per cent higher, at £12.5m, as favourable economic conditions led to strong demand for both new and used cars.

Trading since the end of the first half has been good, with new and used car sales ahead of the same period last year. The group said it was particularly encouraged by next month's orders.

Models such as the Ferrari 612, the Land Rover Discovery and the Vauxhall Tigra suggested this would be a another excellent year the company said.

During the first half, Lookers continued the rationalisation of under-performing outlets, including the closure of its Nissan operations in Manchester and Macclesfield.