HMRC have issued a business brief explaining the implications of the Italian Republic ECJ decision on the calculations of VAT refund claims relating to demonstrator cars. HMRC have now concluded that where the cars were bought to be used in a motor sector taxpayer’s business for a limited time and then sold as an integral part of that taxpayer’s business; the cars cannot be viewed as capital goods of the business. This means that any such claim for over-declared output tax rising from the Italian Republic case must take the impact of partial exemption on deductible input tax into account, because these cars are exempt sales of trading items not exempt capital goods.
HMRC are reviewing claims which have already been repaid without taking proper account of partial exemption and where appropriate they will issue recovery assessment for repayment of VAT and interest. Where the businesses have sent their claims but not yet been paid, HMRC will be inviting them to submit a revised claim which take proper account of partial exemption implications before any payments is made.
To find out more about these changes and how they may affect your business, contact Janice Riches firstname.lastname@example.org or 0207 566 3804.