Fleet News

Court rules in favour of BT over VAT on delivery charges

SOME of the UK's biggest fleets could be in line for major savings after British Telecom won the latest round of its long-running campaign with HM Customs & Excise to recover VAT on car delivery charges. A ruling by the Court of Appeal has upheld BT's argument that delivery charges are completely separate from the supply of cars.

BT deals directly with car manufacturers, not franchised dealers, and this central purchasing arrangement means it is free to negotiate delivery costs separately from the price of the cars. In the Court of Appeal judgement, Lord Justice Nourse said: 'The manufacturers use third party transport companies to deliver the cars to BT, for which they make an additional charge, separate charges for VAT being made on the price of the car and the delivery charge respectively. BT claims it is entitled to deduct the input tax which it pays to the manufacturers for the service of delivering cars.'

This argument convinced a VAT tribunal back in 1996 which said of the service of delivery: 'It is in our view a physically and economically distinct supply which could be provided for quite easily by the purchasers themselves.' The High Court overturned this verdict last year but was itself recently overruled by the Court of Appeal which cited a clause in the EC Sixth Directive declaring: 'The taxable amount shall include incidental expenses such as commission, packing, transport and insurance costs charged by the supplier to the purchaser or customer. Expenses covered by a separate agreement may be considered to be incidental expenses.'

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