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SCRAP VAT ON TAXIS: Is now the time for Government to drop the tax on wheelchair accessible taxis?

Image credit: LEVC

The scrapping of VAT payments on electric Wheelchair Accessible Vehicle (WAV) taxis could help boost the number of cabs and accelerate the industry’s move to a greener fleet.

At present, Value Added Tax (VAT) is 20% of the car’s value. With EVs costing more than internal combustion vehicles, buyers are currently paying more in tax to make the move to cleaner vehicles.

Taxi drivers have long debated whether or not they should be paying VAT at all, especially those offering WAV facilities to the public.

As a rule, VAT generally 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.

There is VAT relief for those purchasing a vehicle adapted to carry wheelchairs.

According to HMRC, individuals purchasing a vehicle on behalf of a disabled wheelchair user can claim relief if the supply of a ‘qualifying motor vehicle’ 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.

If WAV tax relief was offered to cabbies it could potentially knock off over £9,000 on the new LEVC TX taxi.

In February 2019, a Task and Finish Group report on Taxi and Private Hire Vehicle (PHV) Licensing recommended that central Government and licensing authorities should 'level the playing field' by mitigating additional costs faced by the trade where a wider social benefit is provided. The group specifically highlighted the example of where a wheelchair accessible and/or zero emission capable vehicle is made available.

The Department for Transport’s (DfT) response was an interesting one as they admitted to being ‘aware of the additional cost involved in the purchase of a wheelchair accessible vehicle (WAV) or a zero-emission capable vehicle, whether voluntarily or because of licensing requirements’.

The report concluded that whilst Government does not propose to introduce further financial incentives for taxis and PHV based on vehicle type at the current time, they would however ‘keep this under review’.

Since that report, the UK has left the EU which opens up a new line of debate, especially if the Government wishes to see more environmentally friendly wheelchair accessible electric taxis on the streets in the UK.

Historically under EU rules, the question around VAT exemption for taxis was quickly put to bed following a question put forward by the then Department for Transport (DfT) Minister, Andrew Jones MP, in October 2016.

Carly Nimmo, of VAT & International Excise at HM Treasury, replied on the MP’s behalf: “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.”

That door has now opened and with the number of WAV taxis beginning to drop in regions of the UK, is now the time for a serious discussion about public wheelchair accessibility?


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