Many members have contacted the BVRLA with concerns regarding HM Revenue and Customs’ 2 September change to VAT treatment of early terminations.
The BVRLA Tax Working Group met to discuss the association's response to the new guidance.
Following that meeting the BVRLA wrote to HMRC raising the following four points requiring clarity on:
- The scope of the guidance, what exact costs fall inside guidance. Members have raised questions around unfair wear and tear, total write-offs, default charges, interest charges for late payment and their inclusion or exclusion.
- The 50% VAT block.
- There being no retrospective action for members.
- Introduction being pushed back to the next tax year. The association has argued for this on the grounds that there are currently widespread early terminations due to COVID-19 and the guidance requires firms to increase a customers’ overall debt position by 20%. Simultaneously firms are also required by the Financial Conduct Authority (FCA) to take all steps necessary to ensure customers are given sustainable arrangements to repay their debts. This creates a clash between the FCA and HMRC. The BVRLA has also highlighted that there should be a delayed introduction, once clarity is given, for systems and administrative reasons.
The BVRLA has also written to the Financial Conduct Authority regarding this issue.
HMRC has yet to formally respond but have stressed it is aware of the concern this is causing the rental, leasing and fleet and other sectors and have committed to responding as quickly as possible.
See the HMRC’s policy paper on the GOV.UK website.