On April 1 new rules surrounding the sale of permanently adapted vehicles to disabled people were introduced due to abuse of the previous system.
Amongst the changes, a limit to the number of vehicles that can be purchased under the relief has been introduced, with an eligible individual now being able to purchase only one vehicle that meets the qualifying conditions every three years.
There will be exceptions to this rule, for example if the vehicle is stolen, damaged beyond repair or if the individuals condition changes making the vehicle no longer suitable.
These exceptions must be agreed with HMRC and evidence would need to be provided. HMRC will not tolerate dealerships who don’t apply the new three year rule.
Dealerships contravening the new rule will be penalised.
Dealerships must now also complete a VAT1617A form to notify HRMC of the zero rated sale.
Although the new rules state that this must be done within 12 months of the sale, HMRC are encouraging dealerships to send them in at the time of the sale to help crack down on individuals who try and continue to abuse the system.
Failure to comply may result in HMRC raising assessments.
Furthermore, the customer eligibility declaration is now mandatory.
Individuals who continue to abuse the system and provide incorrect eligibility declarations will be issued with a penalty from HMRC.
In severe cases of abuse, where fraudulent intent can be established, an individual may be prosecuted in a criminal court.
Dealers will be affected by the implementation of these new rules.
The number of vehicles that can be sold to customers will be reduced, as well as increased time and cost for administrative tasks such as submitting declarations detailing zero rated sales, with the risk of facing financial penalties if this is not done.
HMRC will use this information to monitor the relief to guard against abuse and fraud.
Author: Michelle Dale (pictured), VAT manager at UHY Hacker Young Manchester