VAT exemption discussion on new taxi purchases could reignite after Brexit

The age old discussion surrounding VAT exemption on all new taxi purchases could reignite after Brexit as Government blame EU VAT rules as current stumbling block. Taxi drivers are currently paying 20% VAT on all new taxi purchases and it’s been party to long-term debate as to whether they should be paying it or not.

Generally, VAT has to be paid on all goods and services. However, in certain circumstances there’s relief from paying VAT on a limited range of goods and services for disabled people.

For some time there has been VAT relief to those purchasing a vehicle adapted to carry wheelchairs. On the HMRC government website it details that an individual purchasing a vehicle on behalf of a disabled wheelchair user can claim relief if they meet the following criteria:

Zero rate VAT on the supply of a ‘qualifying motor vehicle’ that has been:

  • designed to enable the disabled wheelchair user to travel in it, or

  • substantially and permanently adapted to enable the disabled wheelchair user to travel in it and the adaptation is necessary to enable that person to travel in the vehicle

So on paper taxi drivers should be offered tax relief on WAV taxis. That would knock off over £9,000 on the new LEVC TX taxi and nearly £11,000 once the EV grant ends. However, the question around VAT exemption was put forward to Andrew Jones, the then Parliamentary Under Secretary of State at the Department for Transport, in October 2016. Carly Nimmo, of VAT & International Excise at HM Treasury, replied on the MP’s behalf saying: “VAT is a broad based tax on consumption and the standard rate of twenty per cent is applied to most goods and services. Although there are exceptions, these are strictly limited. “There is unfortunately no provision within the EU VAT rules to introduce a zero rate or exemption on the purchase of taxis and therefore the government cannot remove the VAT on such purchases. “While the UK remains a member of the EU, we will continue to meet our obligations, including on the agreed rules on the application of VAT.”

With Brexit looming the debate could spark into life again, especially if the government wishes to see more wheelchair accessible electric taxis whizzing around the UK.

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