The Government has introduced primary legislation in Finance Bill 2017 that will end abuse of the VAT relief on substantially and permanently adapted motor vehicles for disabled wheelchair users. Further information can be found here.
The new rules will specify a limit on the number of vehicles within a specified period of time that an individual can purchase under this relief and require the electronic or written submission of the eligibility declaration form published on GOV.UK. Motor dealers selling adapted motor vehicles under this relief will also be required to provide information regarding those sales to HMRC within a specified time frame. The measure will have effect on and after 1 April 2017. Individuals in breach of these new requirements may be denied the benefit of the zero rate or may be subject to a section 62 Value Added Tax Act (VATA) 1994 penalty if the declaration they make is incorrect.
CTG welcomes the Government’s continued support for disabled wheelchair users in purchasing vehicles that have been substantially and permanently adapted to meet the needs of their disability. We welcome this attempt to stop abuse the relief which risks undermining the integrity of invaluable charity zero rates.
Reform of the relief is aimed at tackling fraudulent use of the current scheme but it will impact disabled wheelchair users who wish to purchase more than one adapted motor vehicle over a three year period. The change builds in legal provisions allowing exceptions to this limit, for example if the medical needs of the wheelchair user change. There may be a small minority of wheelchair users who wish to change their vehicle on a more regular basis for reasons not covered by the exceptions allowing an individual to purchase more than one vehicle every three years. The Government expects that this will rarely be the case but if you disagree please send your thoughts and any supporting evidence to [email protected].
There will be a limit on the number of vehicles that can be purchased under this relief in a set period of time. An eligible individual will be able to purchase one vehicle every three years. There are some instances when this limit can be exceeded, so if an individual’s car is written off or stolen or if the vehicle has ceased to be suitable for the disabled person’s use because of changes in the person’s condition. These exceptions to the limit will be covered in primary legislation.
The government is also making the use of eligibility declaration forms which are available on GOV.UK mandatory. This form clarifies exactly what information an individual needs to provide to support their claim to a zero rated supply.
Motor dealers are also required to send information regarding these zero-rated sales to HMRC. The information required will be specified by a public notice, HMRC will use this information to monitor the exemption to guard against abuse and fraud.
The section 62 penalty will apply to a person who gives an incorrect eligibility declaration to the supplier of a vehicle. The relevant penalty is equivalent to the amount of VAT chargeable on a standard-rated supply of the vehicle. In severe cases of abuse, where fraudulent intent can be established, the individual can be prosecuted in a criminal court.