October 23, 2020
In early September the UK government published a brief that advised VAT should be charged on early termination fees and compensation payments. This was based on the judgements of a cases at the Court of Justice at the European Union.
However, HMRC have now advised they will be revising Revenue and Customs Brief (RCB) 12 (2020) and until this is completed and updated guidance published their operational team has been advised to take no action based on the brief.
They will be looking at whether customers had a legitimate expectation that early terminations and other similar payments were outside the scope of VAT before the publication of RCB 12.
Once they have revised the brief they will expand the guidance available to help make clear what is and isn’t within the scope of VAT. HMRC have advised the British Vehicle Rental and Leasing Association (BVRLA) that they will respond to their representation and provide the industry with an opportunity to comment on this guidance before it’s published.
We will keep you updated as this progresses.