Guidance

VAT relief on adapted motor vehicles for disabled people and charities (Notice 1002)

Find out how to apply for VAT relief on adapted motor vehicles, if you’re eligible to buy these vehicles and the evidence you need to supply them.

Detail

This notice and forms VAT1615A and VAT1617A cancel and replace VAT helpsheets VAT1615 and VAT1616.

1. Overview

1.1 Information in this notice

This notice is about the VAT relief available on certain adapted motor vehicles supplied to disabled people, charities and eligible bodies. It explains:

  • what motor vehicles can be zero-rated for VAT
  • how the motor vehicle needs to be adapted to be zero-rated
  • who’s eligible to buy a motor vehicle at the zero rate of VAT
  • what evidence is needed to support the eligibility for the zero rating of these supplies

1.2 Audience for this notice

You should read this guidance if you’re a:

  • disabled person who usually uses a wheelchair who’s looking to purchase, lease or hire a substantially and permanently adapted motor vehicle
  • family member or nominated representative that intends to purchase a substantially and permanently adapted motor vehicle on behalf of a disabled wheelchair user
  • disabled person seeking to adapt a motor vehicle to suit your needs
  • charitable institution or other eligible body
  • individual looking to purchase a vehicle to donate to a charity or other eligible body
  • motor dealer, finance house or other supplier selling, providing or maintaining a motor vehicle that might qualify for tax relief

1.3 The law

The Value Added Tax Act 1994 (VATA), section 30 states that goods and services specified in Schedule 8 to the Act are zero-rated.

Schedule 8, Group 12 gives details about when motor vehicles for disabled people can be zero-rated.

Some changes were made to this group which came into force from 1 April 2017.

1.4 Changes made to the legislation effective from 1 April 2017

Following a review and a public consultation over the VAT treatment of adapted motor vehicles by HMRC, a number of changes were made to the legislation with effect from 1 April 2017. These are:

  • the introduction of a limit on the number of vehicles that can be purchased under the relief, with an eligible individual now being able to purchase only one vehicle that meets the qualifying conditions every 3 years
  • making customer eligibility declaration forms mandatory
  • making it mandatory for suppliers to send HMRC information about their zero rate supplies
  • the introduction of a penalty that will apply to any person that provides an incorrect customer eligibility declaration form

1.5 Terminology

When dealing with motor dealers and suppliers or HMRC, you may hear the phrases ‘VAT free’, ‘VAT relief’ or ‘zero rate VAT’. In this context, these refer to you not being charged VAT when you purchase an adapted motor vehicle if you’re eligible to do so.

In this notice references to:

  • ‘vehicles’ should be read as references to ‘motor vehicles’
  • ‘wheelchair users’ also includes ‘stretcher users’

2. Types of VAT relief on motor vehicles

2.1 VAT relief

Generally, VAT has to be paid on goods and services. However, in certain circumstances there’s relief from paying VAT on a limited range of goods and services for disabled people.

2.2 How VAT relief works

This is not a VAT refund system and there’s no facility for HMRC to refund VAT to you if you’re charged VAT incorrectly. If you’re entitled to buy VAT-free goods, your supplier should not charge you VAT.

2.3 VAT reliefs on motor vehicles that disabled people, charities and eligible bodies qualify for

To qualify for VAT relief the eligibility criteria has to be met.

Type of user who may be eligible for VAT relief Relief available Criteria to meet
Disabled wheelchair user

or

an individual purchasing a vehicle on behalf of a disabled wheelchair user
Zero rate VAT on the supply of a ‘qualifying motor vehicle’ that has been:
- designed to enable the disabled wheelchair user to travel in it, or
- substantially and permanently adapted to enable the disabled wheelchair user to travel in it and the adaptation is necessary to enable that person to travel in the vehicle
section 3
Disabled individuals who are not wheelchair users Zero rate VAT on the cost of adaptations to suit the individual’s needs section 10
Charities that make a qualifying motor vehicle available to a disabled wheelchair user Zero rate VAT on the supply of a ‘qualifying motor vehicle’ (that’s capable of carrying no more than 12 people including the driver) that’s designed or substantially and permanently adapted to enable a disabled person to travel in it

Zero rate on the supply of some other vehicles
section 4 and section 7
Eligible bodies under Group 15, Schedule 8 of Value Added Tax Act 1994 Zero rate VAT on adapted motor vehicles and in certain circumstances, unadapted vehicles section 7

3. Overview of eligibility criteria for VAT relief on substantially and permanently adapted motor vehicles for disabled wheelchair users

3.1 Overview of eligibility criteria for disabled wheelchair and stretcher users

A supplier can zero rate the sale of a qualifying adapted motor vehicle when all the following criteria have been met.

Condition Description More information
1 The vehicle seats no more than 12 people including the driver and must be supplied to a disabled person who normally uses a wheelchair or stretcher to be mobile section 4
2 The vehicle must be designed or substantially and permanently adapted to enable the disabled wheelchair user or stretcher user to travel in it and the adaptation is necessary to enable that person to travel in the vehicle section 4
3 The vehicle must be purchased for the domestic or personal use of the wheelchair or stretcher user section 5
4 The vehicle supplied must not exceed the 3-year rule (unless an approved exception applies) section 6 and paragraph 13.3
5 A customer eligibility declaration must be completed paragraph 6.3
6 The supplier can produce relevant documents, including the customer eligibility declaration to demonstrate eligibility for the zero rate and certain information is provided to HMRC section 6 and section 13

If you’re supplying to a charity or an eligible body you should read section 7.

3.2 Wheelchair users

3.2.1 Who qualifies as a wheelchair user

For the purposes of this relief, a wheelchair user is any disabled person who normally uses a wheelchair (electrically powered or otherwise) in order to be mobile.

There may be circumstances in which a disabled wheelchair user does not need to use their wheelchair all of the time but who can be considered as normally using a wheelchair. For example:

  • a disabled person with a degenerative condition, such as multiple sclerosis, who uses a wheelchair only when their condition requires it
  • a lower limb amputee

A person who only occasionally uses a wheelchair, for example, when visiting a shopping centre or temporarily because they have a broken leg, is not considered to normally use a wheelchair and therefore does not qualify for the relief.

3.2.2 Whether a mobility scooter qualifies as a wheelchair

A mobility scooter is not a wheelchair for VAT purposes and therefore mobility scooter users do not qualify for this relief.

A mobility scooter:

  • is mechanically propelled
  • has a central steering column
  • has a maximum speed of 4 miles per hour for pavement use, and 8 miles per hour off-road
  • is generally only used outside the home

3.3 Who qualifies as a stretcher user

For the purposes of this VAT relief a stretcher user is anyone who, due to their disability, has to use a stretcher in order to be transported.

3.4 Individuals that may purchase an adapted vehicle on behalf of a disabled wheelchair user

HMRC acknowledges that in some circumstances a disabled wheelchair user may be unable to purchase or drive a motor vehicle themselves, although the sale of an adapted vehicle to a person connected to them would directly benefit the disabled wheelchair user’s mobility. Provided that the purchase is primarily for the domestic or personal use of the disabled wheelchair user rather than the personal use of the connected person and that all the qualifying conditions are met, zero rating can be allowed.

Where an individual has been nominated by a disabled wheelchair user to be their representative to purchase a vehicle on their behalf, we would expect that the individual has a close relationship to the wheelchair user (for example, parent, son, daughter or carer) and that they live within a reasonable distance of the wheelchair user’s home. Such factors help support the position that the vehicle is for the wheelchair user’s personal and domestic use.

Adaptations to the motor vehicle must be permanent and substantial and be designed to meet the specific needs of the disabled wheelchair user, to enable them to travel in it, by entering the vehicle or to enter and drive it. If only minor changes to the vehicle are needed for the disabled person to enter or enter and drive it, then the purchase of the car will not qualify for zero rating although the adaptations may. See guidance at section 10.

If you’re purchasing the vehicle on behalf of a disabled wheelchair user, the supplier may need additional information and evidence, such as:

  • who’s paying for the adapted vehicle
  • who will own the adapted vehicle
  • who’s the registered keeper of the adapted vehicle
  • does the family member or carer have another vehicle for their use
  • where will the adapted vehicle be kept
  • who will use the adapted vehicle
  • what will the adapted vehicle be used for
  • how often will the disabled wheelchair user use the adapted vehicle

It’s acknowledged that the disabled wheelchair user may not legally be allowed to have a vehicle registered in their name. In this circumstance, we would expect supporting evidence to be provided to the supplier.

4. About a ‘qualifying’ adapted motor vehicle

4.1 Eligible vehicles

A ‘qualifying vehicle’ is any motor vehicle such as a car, light van, multi-passenger vehicle (MPV) or motorhome that:

  • has been designed, or substantially and permanently adapted to enable a qualifying person to travel in it (see paragraph 4.3)
  • the adaptation is necessary to enable the qualifying person to travel in it
  • has a carrying capacity of no more than 12 people (including the driver)

4.2 Motorhomes

Motorhomes may qualify for VAT relief although as they’re used as accommodation as well as a form of transport, more adaptations may be needed to enable the disabled wheelchair user to use the vehicle. Additional adaptions, for example, may include reconfiguring the layout to ensure there’s enough room to comfortably move around using a wheelchair. The motorhome must still meet the qualifying conditions at paragraphs 4.1 and 4.3.

4.3 Substantially and permanently adapted motor vehicles

The adaptation to the vehicle must be both necessary and specific to suit the disabled wheelchair user’s particular needs to enable them to travel in the vehicle, or enter and drive it. The adaptation should alter the vehicle in a meaningful way, enabling the wheelchair user to use the vehicle which they could not use before it was adapted.

For a vehicle to be considered as substantially and permanently adapted HMRC would expect to see significant change to the vehicle with the adaptations being bolted or welded to the body or chassis of the vehicle. Adaptations that are wired into the electrics of the vehicle could also qualify for VAT relief. For adaptations to be considered permanent it’s expected that they should be fitted to the vehicle for the shorter of either a minimum of 3 years or the lifetime of the vehicle. If the adaptation is removed before this time then the adaptation may not be considered to be permanent and therefore the vehicle should not have been zero-rated at the point of sale.

A disabled person who usually uses a wheelchair needs to be able to take it with them in the vehicle. Vehicles often need to be substantially adapted to allow a fixed frame or motorised wheelchair designed for permanent use to be transferred into the vehicle, using a ramp and a winch or a hoist, and for it to be held safely and securely in place throughout the journey.

Where a wheelchair can be folded and stowed in the boot of a car or in a storage area in the back of a motorhome, the vehicle does not need to be substantially and permanently adapted to carry it. Whilst some minor adaptations may be required, it’s not sufficient to meet the ‘substantially and permanently adapted’ qualifying condition and any VAT relief will be restricted to the cost of these minor adaptations (specifically not the cost of the motor vehicle itself).

The following are not considered as substantial and permanent adaptations because they are widely available accessories or upgrade options the:

  • fitting of a roof rack or standard roof box
  • attachment of a trailer to the back of a vehicle
  • fitting of automatic transmission
  • fitting of parking or reversing sensors

This list is not exhaustive.

The fact that the vehicle has been adapted does not, in itself, mean that it qualifies for VAT relief.

4.4 Less significant adaptations that are neither permanent nor substantial

If you’re a disabled wheelchair user and need only a minor adaptation to the vehicle this will not be eligible for VAT relief, VAT will be charged at standard rate on the supply of the vehicle. However, there’s a wider VAT relief available to all disabled people (and not just disabled wheelchair users) on services of adapting goods (including motor vehicles) to suit your particular condition. The supply of this service, together with the goods used in the adaptation process, may be zero-rated. See guidance at section 10.

4.5 What is meant by ‘adapted’ for a disabled wheelchair or stretcher user

A motor vehicle is adapted for a disabled wheelchair user if it’s adapted to meet the specific needs of that person’s disability and the adaptation is necessary and:

  • allows the disabled person to travel in the vehicle
  • enables the disabled person to leave the vehicle
  • allows the disabled person to drive the vehicle

The disabled wheelchair user can choose to remain in the wheelchair or use any of the seats in the vehicle.

5. Personal and domestic use

5.1 Qualifying use

To qualify for zero rating the adapted vehicle must be for the domestic or personal use of the disabled wheelchair user. This means normal everyday use by the disabled wheelchair user such as going to the shops, taking the children to school, travelling to and from work. It also includes incidental use at work, providing the main use remains as a private vehicle.

Suppliers cannot zero rate vehicles supplied to businesses regardless of who uses them or how they’ve been adapted. For example, an adapted vehicle that will be used as a taxi or intended for immediate resale at a profit.

Suppliers cannot zero rate vehicles supplied to finance houses. The finance house is purchasing the adapted vehicle for business purposes.

6. What is a ‘relevant’ supply

6.1 The 3-year rule

With effect from 1 April 2017, VAT relief is only allowable on one adapted vehicle, purchased (either outright or through a finance lease) for the personal use of the disabled wheelchair user, in a period of 3 years. This is known as the ‘3-year rule’.

The 3-year period begins on the date that a supply of a zero-rated adapted vehicle is made to a disabled wheelchair user or their nominated representative. The 3-year rule applies to all zero-rated adapted motor vehicles whether purchased within the UK or imported.

An individual or their nominated representative is required to certify with their supplier that they satisfy the 3-year rule and there are penalties for providing an incorrect customer eligibility declaration.

If an individual or their nominated representative wishes to purchase additional adapted vehicles within any 3-year period, then they can do so but they must pay the standard rate of VAT on the purchase of any subsequent vehicle.

6.2 Exceptions to the 3-year rule

There could be occasions when there are reasons why a disabled person needs to replace an adapted motor vehicle within a 3-year period and the normal rules can be waived. These are when the:

  • vehicle has been stolen
  • vehicle has been destroyed or damaged beyond repair in circumstances beyond the control of the disabled person
  • disabled wheelchair user’s condition changes and because of this the vehicle is no longer suitable for use by that person

In order for an exception to the 3-year rule to be made, you’ll need to provide additional evidence to:

  • the supplier of your vehicle - if your previous vehicle has been stolen or destroyed or damaged beyond repair you’ll need to provide information from insurers, police or details from the garage writing-off the vehicle
  • HMRC - if your condition has changed significantly and your adapted vehicle is no longer suitable to meet the needs of your condition, you’ll need to contact the helpline

HMRC will then consider the case and send you a letter confirming whether or not the 3-year exception is met. The supplier will not be able to zero rate their supply to you without this confirmation letter.

6.3 Customer eligibility declarations

Customer eligibility forms must be completed for the sale of a zero-rated vehicle. The customer eligibility declaration form (VAT1615A) must be completed by the disabled person (or their nominated representative) for whom the supply is being zero-rated.

There are penalties for making incorrect customer eligibility declarations and for fraudulent evasion of VAT.

The disabled person or their nominated representative should complete the customer eligibility declaration form and hand this to the vehicle supplier. The supplier will ask you about your eligibility and may ask for additional information or documents to support your entitlement for VAT relief.

Note, this scheme works on the basis that you’re not charged VAT by a supplier. Therefore, you do not apply for a VAT refund from HMRC.

7. Supplies of eligible vehicle to charities and eligible bodies

Charities may buy eligible adapted vehicles VAT zero-rated if they’re making them available (whether by sale of otherwise) to individual disabled wheelchair users for their domestic or personal use.

Certain charities and other eligible bodies may also buy other adapted vehicles, this includes ambulances and vehicles adapted to transport disabled people, see Notice 701/6 Charity funded equipment for medical, veterinary uses.

7.1 Eligible bodies

Eligible bodies may typically include:

  • certain health bodies
  • research institutions whose activities are not carried on for profit
  • certain charitable institutions
  • any person, group or organisation that’s purchasing qualifying goods for donation to one of the eligible bodies specified

This is covered in more detail in Notice 701/6 Charity funded equipment for medical, veterinary uses.

Eligible bodies which are not charities must use wholly charitable funds or wholly voluntary contributions for the purchase of the eligible vehicle in order to get VAT relief.

7.2 Eligible vehicles

When purchased or hired by an eligible body using charitable or donated funds, the following vehicles are zero-rated:

  • specially designed or adapted motor vehicles
  • unadapted motor vehicles that have between 7 and 50 seats, and are purchased or hired for use by an eligible body mainly for the transportation of blind people, deaf people, people with mental disability or terminally ill people
  • vehicles that have been substantially and permanently adapted to carry at least one disabled person in a wheelchair - the number of wheelchair spaces and access facilities depend on the seating capacity of the vehicle
Number of seats Special facilities or conditions
1 to 16 one or more wheelchair spaces and a fitted ramp to provide access for wheelchairs or an electric or hydraulic lift
17 to 26 2 or more wheelchair spaces and an electric or hydraulic lift
27 to 36 3 or more wheelchair spaces and an electric or hydraulic lift
37 to 46 4 or more wheelchair spaces and an electric or hydraulic lift
47 to 50 5 or more wheelchair spaces and an electric or hydraulic lift

VAT Notice 701/6: Charity funded equipment for medical, veterinary uses has more information.

7.3 Ambulances

An ambulance is an emergency vehicle used for transporting sick and injured people or animals. VAT Notice 701/6: Charity funded equipment for medical, veterinary uses has more information about qualifying conditions for zero rating.

8. Repair and maintenance

The repair or maintenance of an adapted motor vehicle can be zero-rated when the work relates to a vehicle (or an adaptation to a vehicle) that was eligible for zero rating when it was bought or supplied.

If you take the vehicle for repair or maintenance to a third party garage you’ll need to produce the original purchase invoice for the vehicle or adaptation to confirm that it had previously been supplied at the zero rate.

Suppliers that did not supply the vehicle will need to check the original invoice for the purchase of the vehicle to confirm that it was supplied at the zero rate. You should keep a copy for your records.

If the adapted motor vehicle is beyond repair due to an accident and needs to be replaced you should read paragraph 6.2.

9. Second-hand adapted vehicle

A second-hand adapted vehicle can be zero-rated if the qualifying conditions are met. Although second-hand cars are usually sold on the second hand margin scheme, this is an optional scheme, not a mandatory one, and an eligible vehicle can be sold outside that scheme and normal VAT practice followed.

Notice 718/1 the margin scheme on second-hand cars and other vehicles has more information about the second hand margin scheme.

10. Minor adaptations and adaptations to motor vehicles for disabled people that do not use a wheelchair

10.1 Minor adaptations to a motor vehicle

If a wheelchair user requires only minor adaptations to be made to their motor vehicle then the cost of the adaptations can be zero-rated, but the purchase of the vehicle would be at the standard rate of VAT.

10.2 Adaptations to motor vehicles for disabled people that do not use a wheelchair

If a disabled person who’s not a wheelchair user needs a motor vehicle to be adapted to meet the needs of their condition, the adaptations can be zero-rated. The vehicle is not eligible for VAT relief but the adaptations may be zero-rated.

11. Penalties

A penalty will apply to a person who gives an incorrect eligibility declaration to the supplier of a vehicle.

HMRC may raise a tax assessment, if a supplier contravenes the 3-year rule or fails to keep and submit the required eligibility declarations.

Abuse of this VAT relief is not acceptable. This includes people purchasing numerous adapted vehicles within the 3-year period, removing the adaptations and then selling the vehicle on for a profit.

In severe cases of abuse, where fraudulent intent can be established, an individual may be prosecuted in a criminal court.

12. Motability Scheme

The Motability Scheme helps disabled people and their families to become more mobile. It provides vehicles and powered wheelchairs to disabled people. The scheme is not administered by HMRC although VAT relief is available for vehicles leased under this scheme.

13. Additional information for suppliers

13.1 Responsibilities of the supplier

You’re responsible for making sure that you’re charging the correct amount of VAT.

If you’re supplying an adapted motor vehicle to a disabled wheelchair user, or providing a service of adaptation, repair or maintenance, you must be sure that all the conditions of the relief are met before you make your supply. Each of these conditions is explained in more detail in this guidance.

You must make sure that for all zero-rated sales that you get and keep a completed customer eligibility declaration, see paragraph 6.3. You must take all reasonable steps to make sure that the declaration is valid and the information in it is accurate.

You must report to HMRC within 12 months of the date of the supply any adapted motor vehicles that you zero rate. Details of what information must be sent to HMRC and how to do this is given in paragraph 13.4.

13.2 Getting customer eligibility declarations

The disabled person or their nominated representative must complete the customer eligibility declaration (VAT1615A) and give you a copy.

Having a customer eligibility declaration does not mean that you can automatically zero rate your supply.

You must be satisfied that the customer declaration made by the disabled wheelchair user is valid.

You should be able to show that you’ve taken reasonable steps to confirm that the declaration is valid. You may wish to ask for additional information or documents to support a claim for VAT relief, such as relevant correspondence.

You must not accept a declaration that you know or suspect to be untrue. If you are not satisfied with any of the answers provided by the customer, you must refuse to supply the vehicle free of VAT.

You should keep the customer eligibility declaration and any supporting documents as part of your records. You should keep records of any questions asked and why the answers provided by the customer were considered credible or not. You should send a copy of the customer eligibility declaration to HMRC within 12 months of the date of the sale of the zero-rated adapted motor vehicle.

13.3 Applying the 3-year rule

When you’re supplying an adapted vehicle at zero rate you need to make sure that either:

  • your supply meets the 3-year rule
  • that one of the 3-year rule exceptions is met

Details of the 3-year rule are at paragraph 6.1 and exceptions at paragraph 6.2.

If, after making checks, you find that a zero-rated supply has already been made to the disabled person or their nominated representative within the 3-year rule period, you must not zero rate your supply unless you’re satisfied that your supply meets one of the exceptions.

If the disabled person feels that they meet one of the exceptions to the 3-year rule, you must get and keep evidence and supporting documentation in order to show that you were satisfied that an exception was met.

If, in circumstances beyond the disabled person’s control, the original vehicle that was zero-rated has been stolen, or destroyed, or damaged beyond economical repair, you need to hold information to prove this. For example, documentation from an insurance company or the police.

If the individual‘s condition has changed they need to get a letter from HMRC confirming this and you need to keep this letter as evidence. Information about the circumstances in which a disabled person may ask for a letter from HMRC can be found at paragraph 6.3.

You may wish to ask for additional documents to support your checks. If you do, you need to keep copies of these documents.

13.4 Information suppliers must give HMRC

Suppliers of adapted motor vehicles (including motor dealers and finance houses) must send information to HMRC about all their supplies of zero-rated adapted motor vehicles.

Suppliers should submit this information to HMRC using form VAT1617A.

Information must be sent to HMRC no later than 12 months after each individual sale of a zero-rated motor vehicle. Suppliers may, however, find it more convenient to submit this information to HMRC, using form VAT1617A, each time a zero-rated supply is made.

Any sales of adapted motor vehicles that you do not zero rate will not need to be included in information that you send to HMRC.

14. Hire and lease of adapted vehicles

The 3-year rule does not affect adapted vehicles hired on a short term lease with no option to buy included. So an individual can hire multiple adapted vehicles in a year for short periods of time, for example when going on trips.

Your rights and obligations

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Published 30 March 2017