V16.948 VAT—private use charge for motor manufacturer's company cars dealer demonstrators and daily rental cars
Information Sheet 7/09, June 2009
1.1 What is this Information Sheet about?
This Information Sheet provides the new value based bands to be applied when using the simplified method of calculating VAT on private use of company cars, demonstrator vehicles and rental cars, otherwise known as the “car averaging” calculation, from 1 May 2009. The change is being made to simplify procedures for businesses by applying the same bands for calculating the VAT due on private use of a car as those for direct tax purposes. It does not alter the basis of the calculations agreed with the relevant trade bodies which mean that businesses are not required to carry out complex private use calculations. The relevant trade bodies have been consulted on the new bandings.
1.2 Who does this affect?
It affects motor dealers, manufacturers and concessionaires, daily rental companies and contract hire companies who are entitled to reclaim VAT on the purchase of cars but who are required to account for output tax on the private use of a car. These businesses have the option to use the simplified car averaging calculation under the terms of the existing administrative agreements between HM Revenue & Customs (HMRC) and the Society of Motor Manufacturers and Traders Limited (SMMT), the Retail Motor Industry (RMI) Federation and the British Vehicle Rental and Leasing Association (BVRLA).
1.3 When do the new bands come into effect?
The new bands will be introduced with effect