Fleet News

Blow to fleets over European Court ruling on VAT recovery

THE fleet industry looks set to lose its £26 billion company car VAT recovery battle with HM Customs & Excise. Following a ruling in the European Court of Justice, British VAT experts told Fleet NewsNet that the industry's protracted four-year fight looked to have ended in defeat.

On Thursday the ECJ gave its ruling on a case brought by the European Commission against the French Government, which had many similarities with the bid by TC Harrison, RoyScot Leasing and Allied Domecq to recover VAT on cars leased to fleets, company cars used for business purposes, perk cars, demonstrator vehicles and short-term hire cars. These companies - and almost 5,000 others which have lodged similar claims - are still awaiting the ECJ's judgement on their case, but the ECJ upheld a French law which prevents a taxable person from recovering VAT on a vehicle, even if it is the tool of their trade.

John Kennedy, partner in the VAT group at Deloitte & Touche, said: 'This will come as a bitter blow to all those businesses whose claims are lodged with HM Customs & Excise. In particular the three leading UK cases in Europe will have to be reviewed and it now seems unlikely they will succeed. At this stage it does not seem worthwhile for people to lodge further claims.' At leading law firm Clifford Chance, Etienne Wong, head of the VAT unit, said: 'It's a gloomy decision and a bad omen for the RoyScot Leasing, TC Harrison, and Allied Domecq case.'

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