Fleet News

Company car VAT treatment branded unfair

THE UK's VAT treatment of company cars is 'unfair' according to one of the accountants leading the fleet industry's campaign to recover £15 billion in back-paid VAT. Three companies, TC Harrison, Allied Domecq and Royscot Leasing, had spearheaded the campaign.

But last week the European Court of Justice ruled that European Union member states were allowed: 'to retain general exclusions from the right to deduct the VAT payable on the purchase of motor cars used by a taxable person for the purposes of his taxable transactions, even though 'those cars were essential tools in the business of the taxable person concerned', or 'those cars could not, in a specific case, be used for private purposes by the taxable person concerned'.

This verdict ended the fleet industry's long running legal campaign for a fairer VAT treatment of company cars and the reimbursement of VAT levied on company cars since 1973. Tony Lynne, head of indirect tax at KPMG Tax Advisers, who advised TC Harrison, said: 'The unfair nature of the system, in which UK car dealers and other users are burdened with additional costs, was recognised by the Commission, but not by Customs & Excise nor the Court. Outdated rules still apply.'

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