VAT – Motor Trade issues
HMRC have issued a dedicated update notice for the motor trade. It covers two key areas:
VAT rules for cars and vans
HMRC clarified their interpretation of the definition of a motor car for VAT purposes. The guidance specifically relates to the different VAT rules for cars and vans.
Historically, it has been quite easy to distinguish between cars and vans. For example, vans usually have no rear seats, metal side panels to the rear of the front seats and a load area which is unsuitable for carrying passengers. However, HMRC have noticed that a number of new vehicles are appearing on the market which makes it difficult to distinguish whether the vehicle is a car or a van.
The guidance draws attention to this fact and reminds VAT registered businesses that HMRC publish a list of car-derived vans. In such cases the VAT element of the acquisition price may be deducted (subject to the normal rules) as they are not seen as cars for VAT purposes. If a ‘van’ is not listed then it is the purchaser’s responsibility to obtain confirmation in writing from the supplier that the vehicle meets the technical criteria to be classified as a van for VAT purposes.
HMRC are also reminding motor traders of the implications of the ECJ decision in Nordania Finans. This concerned claims for output tax over-declared on car sales where input tax was blocked on the purchase of the cars. And this in turn followed the result of an earlier ECJ decision known as the ‘Italian Republic decision’.
HMRC is now asking businesses whose claims have not yet been paid to revise their claims to take account of the partial exemption implications. Where claims have already been repaid by HMRC without making adjustment for partial exemption, HMRC is issuing recovery assessments subject to the appropriate time limits. The claims relate to historic periods and many claims were submitted as part of the business’s ‘Fleming’ claims. The deadline for submitting ‘Fleming’ claims expired on 31 March 2009.
HMRC has updated its current departmental guidance which is likely to be of interest to businesses with claims which are subject to appeal to tribunal.