VATNMT8100 - Treatment of specific cases: tax paid vehicles
Note: The content of this manual applied up until 31 December 2020. Any content still applying to Northern Ireland after this date can be found in the VAT New Means of Transport Northern Ireland (VATNINMT) manual.
This section explains how to treat the movement of tax paid NMT from one country to another and how to treat any change to the place of taxation.
Acquisition in to the UK of tax-paid new vehicles from another member-state
There are three primary scenarios we come across
Deposits in lieu of VAT
This can be a tricky area as it can give rise to a vehicle being taxed in two member states. If this occurs it is likely to be due to administrative reasons rather than double taxation. Double taxation occurs where the law correctly applies a VAT charge in two member States; in the case of new means of transport the EU law clearly provides for taxation in only one member state - that of intended consumption.
Generally the difficulty arises because of a misunderstanding on the part of the supplier as to the intention of the customer and of the customer in understanding the process. In most cases this should be readily rectified once the facts have been established.
The most common problem HMRC come across is where a supplier in one Member State takes a deposit from the customer equivalent to VAT which is refundable once the vehicle is proven to be correctly accounted for in the member state of destination. Customers sometimes have difficulty in recovering this deposit (for example supplier has gone out of business) and consider they have thus paid VAT twice. HMRC can’t normally get involved in these claims as in such cases the claimant is normally a creditor of the supplier.
Error at time of purchase
Normally this is where the customer forgets or is ignorant of the NMT rules and buys the NMT fully VAT paid. On arrival in the UK a declaration (through a VAT415 or NOVA) is required and HMRC assess for the VAT due. While the effect is to tax twice this is not double taxation in the strict sense as clearly there is an error which needs to be rectified. In many cases the customer will try and argue that the UK VAT is not due as it’s already been paid elsewhere. However, as the overpayment has been made in the State of supply and the customer needs to request a refund from the supplier or State authorities. This was confirmed in the 2011 First Tier Tribunals James B Davison [2012] UKFTT 89 (TC), Richard Munday [2012] UKFTT 177 (TC) and previously in a 1990 Tribunal VT13669: R M PATTERSON.
Change of intention
This is where a person buys a means of transport for domestic consumption but subsequently their plans change while the vehicle is still a NMT and removes it to another member state. Since 1999 there has been an informal VAT Committee agreement “Lisbon” in place between member states and in 2011 the VAT implementing Regulations 282/2011 formalised the principles into law:
The following shall not result in intra-Community acquisitions within the meaning of point (b) of Article 2(1) of Directive 2006/112/EU:
(a) the transfer of a new means of transport by a non-taxable person upon change of residence provided that the exemption provided for in point (a) of Article 138(2) of Directive 2006/112/EU could not apply at the time of supply;
(b) the return of a new means of transport by a non-taxable person to the Member State from which it was initially supplied to him under the exemption provided for in point (a) of Article 138(2) of Directive 2006/112/EU.
This covers two slightly different cases:
- where the person essentially moves house with an NMT and says that the VAT remains due in the state of origin and
- where a NMT is removed as intended but then returned following a change of intention and says that the VAT remains due in the country it was removed to initially.
This accords with the principle set out by the ECJ in the Swedish yacht case VATNMT3600:- place of taxation follows the intention at the time of supply.
Examples of how to treat change of intention cases can be found in VATNMT8200 to VATNMT8300.
Guidance in VATNMT5200 and VATNMT7000 will also need to be considered in cases involving Diplomats and UK/NATO forces.
Dispatch of UK tax-paid new vehicles to another member-state
Largely this will be the converse of the above examples of where a tax paid vehicle is removed from the UK while being a NMT.
Where there is a removal of a tax paid vehicle under circumstances where the VAT is correctly due in another Member State the PTU will consider refunding the VAT on application by the customer where they can show that the VAT has been declared to the authorities in that other member state.
There is an additional scenario which is where the vehicle while still being a NMT is sold second-hand by the original customer. This is dealt with in VATNMT4400.