Revenue and Customs Brief 19 (2020) VAT- repeal of the VAT (Treatment of Transactions) Order 1992
Published 30 November 2020
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Purpose of this brief
This brief announces the Government’s intention to repeal, before autumn 2021, the VAT (Treatment of Transactions) Order 1992.
Readership
Government departments and NHS bodies that supply cars to their employees under salary sacrifice arrangements.
Background
The repeal of the VAT (Treatment of Transactions) Order 1992 will ensure government departments and NHS bodies cannot exploit 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.
An adverse decision of the Court of Appeal (HMRC v Northumbria Healthcare NHS Foundation Trust [2020] EWCA) has led to the unintended outcome of permitting government departments and NHS bodies to obtain a full refund of VAT in respect of its employees’ own private vehicles. This result is contrary to the operation of the VAT system, which blocks recovery of VAT on private vehicles and private consumption more generally.