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Dealers urged to be aware of new VAT guidelines on adapted vehicles for disabled customers

HMRC office

Dealers are being urged to ensure staff involved in the sale of adapted vehicles for disabled customers are aware of new VAT guidelines.

Yesterday HMRC issued the VAT notice containing details of the new guidelines regarding zero rating sales of such vehicles. 

Although many of the rules have been announced previously, motor retailers have been waiting for guidance on specific actions they would need to take. As the changes are effective from April, there was concern that there would not be time for systems to be updated.

Michelle Malone, tax director at business improvement specialist ASE, said: “It is vital dealers ensure any staff who are involved in the sales process for these type of transactions are aware of the rule changes to avoid triggering penalties.

“Procedures must be updated to reflect the new requirements and a system for informing HMRC of each relevant sale should be introduced.  Although the time limit for submission of the forms is 12 months, I would expect that it would be easier for this to be incorporated into normal VAT quarterly reporting.”

The main changes include that only one vehicle can be supplied zero rated, per customer in a three year period. 

There are some exceptions to this, said ASE, but supporting documentation and sometimes advance clearance must be obtained.

“This means that the onus is still on the dealer to ensure conditions have been met.  It is currently unclear what HMRC’s attitude could be to the burden of proof required in an area which relies on the customer providing accurate information.”

Eligibility declarations are now mandatory and must be submitted to HMRC within 12 months of the date of the sale. An additional form VAT1617A summarising the transactions should also be sent.

“A positive step is that a customer could now be subject to penalties for false declarations,” Malone said.

> HMRC notice on adapted motor vehicles for disabled people

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