Fleet News

£15bn VAT battle hopes dashed by European Advocate General

FLEET industry hopes of victory in the long-running £15 billion VAT battle with HM Customs & Excise have been dealt a blow in Europe. An official Opinion issued by the European Court of Justice's Advocate General has decided that the UK Government would not have to relax the laws which restrict the recovery of VAT on company cars.

The ECJ normally follows the Opinion of the Advocate General, although it will not make its final judgement until later this year. Hundreds of fleets have filed claims on the back of three cases brought by TC Harrison, Royscot Leasing and Allied Domeqc to recover VAT on company cars going back as far as 1973. As much as £15 billion is at stake in the legal wranglings which started in 1994.

This week's verdict came after the VAT contestants entered the final round in November when the case was heard in the European Court of Justice. The UK leasing industry won a partial victory in August 1995 when it won the right to recover VAT on cars bought to lease to customers, although Customs then imposed a 50% VAT block on the lease rentals.

But dealerships and owned fleets are still unable to recover any VAT on cars which have any element of private use, and they have been given little hope by the Advocate General's findings. He ruled that member states are authorised 'to adopt or retain in force legislative provisions which excluded the right to deduct value added tax in respect of motor cars used for a taxable person's business'.

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