Fleet News

Fleet industry loses £15bn VAT recovery battle

THE fleet industry has lost its £15-£25 billion company car VAT recovery battle with HM Customs & Excise. The High Court, on appeal, ruled against the three companies which brought the test cases - motor dealer T C Harrison, Allied Domecq and RoyScot Leasing. The High Court's decision not to allow a further appeal to the European Court, where a final ruling would have taken up to two years, could see the end of the battle.

VAT experts were divided on whether the battle was now over, but leading fleet industry figures from both the British Vehicle Rental and Leasing Association and the Association of Car Fleet Operators hoped the decision marked the end.

Leading accountant KPMG, which advised T C Harrison, has not given up the battle which involves the repayment of VAT on all vehicles purchased for business use backdated to 1973. The High Court was asked to rule on whether UK VAT law in that area was compatible with EC VAT law.

The companies now have four weeks to appeal, or to apply for an extension. The judgement came three weeks after the High Court appeal hearing (Fleet News, April 26) which challenged the ruling made by a tax tribunal last year rejecting a move to allow fleets to recover VAT on all cars purchased for business use - essentially demonstrator, contract leased and short-term hire vehicles (Fleet News, July 14, 1995).

KPMG had argued that such vehicles were invariably driven for business purposes, although there was an element of private use. The company said the present tax system did not differentiate between the two forms of mileage and VAT was therefore levied accordingly. As a result businesses had been taxed on both.

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