V3.242 Motor cars

Generally speaking, input tax on the supply, acquisition or importation of a motor car1 is excluded from credit2.

Where certain conditions are met, however, input tax credit is permitted3. If circumstances change such that, where input tax has been recovered, the prescribed conditions cease to be met, the self-supply provisions are triggered to create a VAT charge.

A self-supply charge is triggered where a motor car falling within one of the descriptions under heads (a)–(d) below:

  1.  

    •     has not been supplied by a taxable person in the course or furtherance of a business carried on by him, and

  2.  

    •     is used by him such that, if it had been supplied to, acquired by, or imported by him at that time, his entitlement to input tax credit would have been wholly excluded4

Motor cars falling within the scope of the self-supply charge are as follows:

  1.  

    (a)     a motor car which is produced by a taxable person otherwise than by the conversion of a vehicle obtained by him5

  2.  

    (b)     a motor car which is produced by a taxable person by the conversion of another vehicle (whether or not a motor car6), and the VAT on the supply, acquisition or importation of that vehicle was not wholly excluded from credit,

  3.  

    (c)     a motor car which is supplied to, acquired by, or imported by a taxable person, and the VAT on that supply, acquisition or importation was not wholly excluded from credit,

  4.  

    (d)     a motor car which is transferred to a taxable person as

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