VAT exemption rules on adapted vehicles
Helping people to lead active and mobile lives since 2002
The majority of vehicles we supply to private individuals qualify for VAT exemption, providing they are solely for private use, and meet the new 3 year rule.
There are also different rules for charities and businesses.
Our experienced team can guide through the legislation and requirements, and you can read our guide below.
Legislation changes in April 2017
Following a review and a public consultation over the VAT treatment of adapted motor vehicles by HMRC, a number of changes were made to the legislation with effect from 1 April 2017. These are:
The introduction of a limit on the number of vehicles that can be purchased under the relief, with an eligible individual now being able to purchase only one vehicle that meets the qualifying conditions every 3 years
Making customer eligibility declaration forms mandatory
Making it mandatory for suppliers to send HMRC information about their zero rate supplies
The introduction of a penalty that will apply to any person that provides an incorrect customer eligibility declaration form
Qualifying for Zero VAT
To qualify for zero rating the adapted vehicle must be for the domestic or personal use of the disabled wheelchair user. This means normal everyday use by the disabled wheelchair user such as going to the shops, taking the children to school, travelling to and from work. It also includes incidental use at work, providing the main use remains as a private vehicle.
Suppliers cannot zero rate vehicles supplied to businesses regardless of who uses them or how they have been adapted or finance houses.
The three year rule
VAT relief is only allowable on one adapted vehicle, purchased (either outright or through a finance lease) for the personal use of the disabled wheelchair user, in a period of 3 years. This is known as the ‘3-year rule’.
An individual or their nominated representative is required to certify with their supplier that they satisfy the 3-year rule and there are penalties for providing an incorrect customer eligibility declaration.
If an individual or their nominated representative wishes to purchase additional adapted vehicles within any 3-year period, then they can do so but they must pay the standard rate of VAT on the purchase of any subsequent vehicle.
To find out more information regarding VAT relief on adapted motor vehicles for disabled people and charities (VAT Notice 1002) you can read more on the government website by clicking here