4 Eyes Ltd: VAT, Tax and Customs Consultants

Revenue & Customs Briefs 41/11 and 42/11 announce the withdrawal, effective 1 January 2012, of concessions which permitted: zero-rating of cars which are adapted shortly after sale for the use of a disabled person or a charity making it available for such use; and zero-rating for parts and accessories designed solely for use in, or with, qualifying boats designed or permanently and substantially adapted for use by disabled persons or charities. The withdrawal of the concession does not affect zero-rating for cars adapted before sale, nor does it affect zero-rating for qualifying boats, parts and accessories used to repair or maintain them or parts and accessories included in a single supply of a qualifying boat. Care must be taken to retain the benefit of the remaining reliefs as far as possible.

Revenue & Customs Brief 41/11 'VAT: motor vehicles adapted after initial supply to disabled people - important change from 1 January 2012' and Revenue & Customs Brief 42/11 'VAT: parts and accessories for boats supplied to disabled people and charities - important change from 1 January 2012' are available on the HMRC website.

HMRC explains that the concessions are being withdrawn because they go beyond what is permitted in item 2 Grp 12 Sch 8 VAT Act 2012 and the EU legislation.

Comment

Suppliers and purchasers of vehicles and boats which are intended for use by disabled people should carefully consider how and when the vehicles, adaptations and parts and accessories are to be sourced. In many cases, it should be possible to retain the benefit of zero-rating when cars and boats which are to be adapted are being acquired, provided that the supplier, adapter (if a separate business) and purchaser work together to ensure that the final supply is of a fully adapted car or boat.

As regards other equipment and accessories supplied after acquisition, the supplier and purchaser should consider whether the supply could fall within another relief within Grp 12 Sch 8 and, where the supply is to a charity making the vehicle available to disabled persons, whether it forms a cost component of a supply of palliative care for the purposes of item 5 Grp 15 Sch 8, an alternative source of zero-rating relief - see British Disabled Flying Association [2011] UKFTT 743 (TC).

If you would like to discuss the implication of these changes, please contact 4 Eyes Ltd.