TRADE ISSUES

HMRC have now provided an update on several VAT issues relevant to the motor trade to include their revised interpretation of the definition of a motor car (for VAT purposes) and a further update on retrospective ‘Fleming’ claims which may need adjusted as a result of the Nordania Finans partial exemption case.

Car Derived Vans and Combi Vans

The newly issued guidance clarifies HMRC's interpretation of the definition of a motor car as contained in the Value Added Tax (Cars) Order 1992.

HMRC recognise that many car-derived vans pose no problem with regard to the current definition of a motor car, in that they are clearly vans or non-motor cars for VAT purposes. For example they have no rear seats, metal side panels to the rear of the front seats and contain a load area which is highly unsuitable for carrying passengers etc.

However HMRC felt that clarification to the definition was necessary in light of recent developments in the car-derived van market, which have resulted in the manufacture of vehicles with a payload of less than one tonne effectively blurring the distinction between cars and vans and making it difficult to categorise these types of vehicles under VAT legislation.

The new guidance refers to a list of car-derived vans on which VAT may be deducted (subject to the normal rules) as they are not seen as cars for VAT purposes. The list has been compiled by HMRC and is based on information supplied by manufacturers. Readers should note that at any one time the list may not be complete or up to date especially where models change or information has not been provided by the manufacturer to categorise the vehicle.

The list is also specific to vehicles which are produced or converted by the manufacturers or sole concessionaires and which have been notified to HMRC. Vehicles from other sources are not shown and therefore may not meet the criteria to be treated as commercial vehicles.

In these cases HMRC stress that it is the responsibility of the purchaser to obtain confirmation in writing from the vendor that the vehicle meets the technical criteria. Vendors can request guidance on the technical criteria from HMRC's VAT Helpline by calling 0845 010 9000.

The newly issued guidance can be found at http://www.hmrc.gov.uk/vat/managing/reclaiming/motoring.htm and the list at http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?_nfpb=true&_pageLabel=pageLibrary_ShowContent&id=HMCE_PROD_010443&propertyType=documen

Retrospective Claims for VAT Overdeclared by Motor Retailers Following the Marks and Spencer European Court Decision

Following a review of the implications of the ECJ decision in Nordania Finans, HMRC's view (set out in Revenue and Customs Brief 43/10) is that these claims did not take proper account of European case law on partial exemption. As a result HMRC believes that those businesses whose claims have not yet been paid must 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 will issue recovery assessments where appropriate subject to the relevant time limits.

For more information go to http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?_nfpb=true&_pageLabel=pageLibrary_ShowContent&propertyType=document&id=HMCE_PROD_011251