Fleet News

VAT ruling may open floodgates

SCOTTISH automotive group Arnold Clark has won a court battle that could lead to the leasing industry being able to claim back millions of pounds in VAT rebates, although it is unlikely fleet managers will see cash being given back to them.

Arnold Clark made the multi-million pound claim at the Scottish VAT and Duties Tribunal for VAT paid on volume bonuses received from manufacturers in the group’s contract hire and daily rental businesses.

Her Majesty’s Revenue & Custom’s (HMRC) decision to charge VAT on the bonuses – effectively saying the payments were separate to the original deal for the vehicles – was ruled to be incorrect by the European Court of Justice. HMRC has claimed that leasing companies will have accounted for the extra VAT charged on bonuses, and passed the cost on to their customers, and that by refunding the money, many companies would be ‘unjustly enriched’.

However, Arnold Clark and British Vehicle Rental and Leasing Association argue this is not the case, with BVRLA director general John Lewis saying: ‘HMRC’s justification is based on a misconception since had the VAT been recovered in the first place then rentals to customers would have been lower and the organisations concerned would have done more business. As it is, they lost that increased business and the profit that went with it.’

If other leasing firms are successful, then VAT claims going back as far as 1973 could be paid, meaning a multi-million pound windfall for the industry.

But fleet managers should not expect to see money coming their way, according to industry consultant Colin Tourick.

He said: ‘This decision rights a wrong but will have no impact on fleet managers. When companies make losses on residuals or maintenance costs they take it on the chin. The key thing for managers is that they get the best deal that’s available at the time, and that’s what they got in this situation.’

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