HM Revenue and Customs has issued a policy paper announcing the Government’s intention to repeal, before autumn 2021, the VAT (Treatment of Transactions) Order 1992.
This will ensure government departments and NHS bodies cannot use the legislation to give themselves a VAT recovery advantage over other taxpayers. The legislation was originally introduced to avoid double taxation, but subsequent changes to UK law and policy have meant that the order is no longer required.
This will impact Government departments and NHS bodies that supply cars to their employees under salary sacrifice arrangements. Members offering salary sacrifice schemes should consider the impact this may have on their business.
A decision of the Court of Appeal (HMRC v Northumbria Healthcare NHS Foundation Trust [2020] EWCA) meant the provision of cars to NHS workers was treated as outside the scope of VAT, even though the Trust could recover VAT on procuring the cars.
