January 2022 VATwatch

Happy New Year

I hope you all had a lovely Christmas and are looking forward to 2022.  

VAT on Electric Vehicles

I have had a number of enquiries from people lately asking whether VAT on electric cars is recoverable as “Surely the government want to incentivise people to buy them!”.

At the moment, the answer is no, recovery of VAT on electric cars is blocked, in the same way as VAT on any other car.  

The VAT Practitioners’ Group technical chair recently took part in some research conducted by HMRC into the VAT relating to electric vehicles. It seems to have been prompted following comments on the fact the Revenue & Customs Brief 7/2021 did not seem to allow recovery of VAT on charging costs by an employer unless the vehicle was charged at the employers premises. The research did go wider.

Whilst it is not yet possible to comment on the specific questions, ideas suggested did include:

·       100% recovery of VAT on purchase/lease of the vehicle if a company car to encourage “greener” cars. May need to have a private use adjustment;

·       Removal of the test for insurance that automatically assumes that sole proprietors will have private use because their cars are often on personal rather than business insurance;

·       Calculation of the costs of electricity to claim VAT if the employee charges the car at home;

·       No receipt required for charging in public places where the value is less than £25

Nothing specific ha been agreed yet, and the above are only ideas, but it seems this is an area where change may happen in the near future.

Land Exemption

In May 2021, there was a call for evidence in relation to the land exemption, to establish where difficulties arose and how the system might be improved.

HMRC received responses from 70 separate stakeholders and a summary of these has now been published.

It seems that, whilst some difficulties occur, the majority of respondents were wary of making sweeping changes to a system that most businesses shave learned to live with.  

VAT Fraud

The list of businesses involved in VAT fraud has been updated and the details published. 

Uber in the News Again

There has long been a question mark over the agent v principal relationship for taxi hire firms. In some cases the traveller has contracted with the unregistered taxi driver and not had to pay VAT, in some cases, the contract is with the VAT registered taxi firm and so VAT was due on the fare.

Uber always maintained that in their business model, the agreement was between the traveller and the driver and so no VAT was due.

The High Court has now ruled that the contract is between Uber and the customer and so VAT will be due.

Updated Advisory Fuel Rates

The advisory fuel rates to use from 1 December have been updated by HMRC.

VAT Statistics

VAT Statistics for the period ended 31 March 2021 have now been published.

Total VAT receipts were down 22% on the previous year, in part because of the spreading of deferred VAT payments due to covid.

Thank you for taking the time to read this VATwatch round-up.