December 23, 2020
In September we wrote about guidance from HM Revenue and Customs (HMRC) in the Revenue and Customs Brief (RCB) 12 (2020) following judgements in the Court of Justice of the European Union (CJEU).
The brief advised that VAT would be applicable on charges for early termination of lease agreements.
Since then there were concerns from lenders and the BVRLA which prompted HMRC to advise their operational team would not be taking proactive action until updated guidance was made.
HMRC has now said that a new brief will be published early in the new year and that the charges will then be applicable from the 1st of February and will not be charged retrospectively.
When this new brief is published the September guidance will be withdrawn.
Already, we’ve had some guidance on charges where VAT will not be applicable. HMRC have said that where a charge is made that is provided for in a contract but not directly linked to the intended supply then it will not be within the scope of VAT. For example, if a car is written off during the hire of the vehicle then VAT will not be charged on the payment for this.
We will update you as we get further information from the new brief.