VAT and motoring expenses

Article Abstract:

On April 6, 1987, new value-added tax (VAT) rules will be applied to deductions by British companies for business use of automobiles. The new rules are occasioned by the passage of the Finance Act of 1986. Under the new rules, 100 percent of VAT paid for gasoline is reclaimable as input taxes, when automobiles are used for business purposes or for private purposes by employees as partial compensation for work performed. However, companies seeking to recover VAT must account for output tax using appropriate scale charges. Application of scale charges and documents that must be maintained to claim VAT recovery are briefly described. The new VAT rules applicable to corporate automobile usage are preferable to the current system, in which VAT officers determine reasonable amounts of VAT recoverable on a case-by-case basis.

Automobiles, Company, Company cars

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Premium VAT and leases

Article Abstract:

Great Britain's value added tax (VAT) affects amounts paid to encourage people to sign leases in three basic categories: zero, exemption, and standard ratings. Two types of premiums are paid in leased properties: by the incoming tenant for obtaining or signing a lease or by the current landlord or tenant for taking or assuming the lease. Recent VAT Tribunal cases are described. It is suggested that payments for constructing a building and giving a major interest in it will remain zero-rated. Reverse premiums to tenants or buyers on the grant of a zero-rated major role will be a service and standard-rated. Non zero-rated payments will be taxable as a service at standard rate when made by a tenant to a landlord or owner for the grant or surrender of a lease.

Analysis, Tax planning, Leases

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VAT next?

Article Abstract:

The Finance Act 1985 is too severe and should be changed, especially regarding the value-added tax (VAT). There are no provisions in current VAT enforcement procedures for mitigating circumstances, so the whole statute should be revised by reducing penalty and surcharge rates. The Board of Customs and Excise proposes a new set of enforcement rules to be ready for the changes in the 1988 Finance Bill. These changes should include reassessment of all the bases for 'reasonable excuse' and 'mitigation', late registration penalties, default surcharges, default interest, and serious misdeclaration.

Laws, regulations and rules, United Kingdom. Board of Customs and Excise

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