PracticeConsultingCompany car VAT rule could be illegal

Company car VAT rule could be illegal

A British VAT regulation simplifying company car VAT returns could effectively be declared illegal next year by the European Court of Justice.

Link: ECJ decisions costing UK £8bn annually

The rule involves Customs & Excise restricting to 50% the proportion of company car hiring or leasing charges that are declared as a business expense and freeing a businesses hiring or leasing cars from having to keep records of private mileage.

The problem with this rule is that it does not comply with standard European Union VAT directives and although the European Commission has proposed a special exemption be extended a further year, it warned that an impending ECJ ruling on a similar German system could effectively ban the practice.

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