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Land Rover Discovery | AccountingWEB | Tow-tal victory as trailer business overturns VAT charge
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Victory as trailer business overturns VAT charge

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Recovering VAT on cars and motoring expenses can be a bumpy road. Here, Alex Spencer looks at a case concerning exactly that.

23rd Feb 2024
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Recovering VAT on cars and motoring expenses can be a bumpy road. In Three Shires Trailers Ltd v HMRC, the first tier tribunal (FTT) considered the ‘self-supply charge’ that may arise when a VAT-registered taxpayer converts a commercial vehicle into a motor car.

The taxpayer purchased two Land Rover Discovery vehicles for the transportation of trailers to customers, the collection of trailers from suppliers and to transport personnel to attend trade fairs. It incurred VAT of £22,497.66 on that purchase.

It was common ground that, at the time of purchase, the Land Rovers were not ‘motor cars’ for VAT purposes.

A few days later, the taxpayer installed - on a temporary basis - fold-up seats (and seat belts) behind the driver and passenger seats, and cleared the back windows which had previously been blacked-out.

The reason for the conversion, according to the taxpayer, was to facilitate transportation of additional staff to trade fairs, hence expanding the vehicles’ use within the business.

The question was whether the cars then became ‘motor cars’ because of those works and whether the taxpayer was required to pay output VAT to HMRC under the ‘self-supply’ legislation.

Wheely confusing legislation?

When a taxpayer purchases a commercial vehicle on which it recovers input VAT and subsequently converts that vehicle into a ‘motor car,’ it may be required by Article 5 of the Value Added Tax (Cars) Order 1992 to account for output VAT as if it had supplied the vehicle to someone else. This is the ‘self-supply charge.’

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Replies (6)

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By Paul Crowley
23rd Feb 2024 15:31

Buy and convert. A new tax avoidance plan?

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By Rob Swan
26th Feb 2024 08:40

HMRC, once again wasting public money putting the letter of the law a long way above the spirit of the law, IMHO. Seems common sense has long gone.

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By AndrewV12
26th Feb 2024 09:53

'A few days later, the taxpayer installed - on a temporary basis - fold-up seats (and seat belts) behind the driver and passenger seats, and cleared the back windows which had previously been blacked-out.'

A few days later, mmmmmm all a bit suspicious.

'but had become motor cars because of the conversion a few days later, even though the conversion was temporary.'
I bet it was temporary when they got HMRC investigation.

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By rmillaree
26th Feb 2024 13:18

Absolute stupidity here from vat office not covering their own backs by failing to look at the consequences of these vehicles being treated as cars with no private use.

Somewhat surprising that the argument whether they are car or vans "is not relevant mlord" was not raised earlier - presumably there was scope for this to have been settled quickly on the basis they are wholly business use vehicles stored at business premises overnight.

Hey ho cant blame company and Mr Kaney for trying all available avenues and keeping the sucker punch back - vat office stupid for not seeing the very obvious sucker punch here imho.

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By matthew pennifold
28th Feb 2024 15:15

The definition of motor cars cited seems to include twin cab pickups.

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Replying to matthew pennifold:
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By Rob Swan
29th Feb 2024 09:21

Q: When is something obviouis, not?
A: When HMRC say so ;)

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