The Value Added Tax (Input Tax) (Amendment) Order 1999

Explanatory Note

(This note is not part of the Order)

This Order amends the Value Added Tax (Input Tax) Order 1992 (S.I. 1992/3222) (the Input Tax Order). Part of the changes take effect on 1st December 1999 and part on 1st March 2000.

The Input Tax Order restricts persons from claiming VAT recovery on most business cars, goods and services used for business entertainment and fixtures in new homes. The Order amends the definition of “motor car” in the Input Tax Order, removes motor manufacturers' and dealers' stock-in-trade cars from restriction of VAT recovery and abolishes requirements for persons to account for VAT on the disposal of goods on which they were ineligible for VAT recovery.

Article 3 of the Order amends article 2 of the Input Tax Order to remove London-type taxis and twelve seater vehicles that do not meet road safety regulations from the exceptions to the definition of “motor car”. It adds to the exceptions to the definition vehicles that have a payload of one tonne or more. Article 3 also inserts definitions of “motor manufacturer”, “motor dealer” and “stock in trade”. A redundant definition of “printed matter” is deleted. This change takes effect from 1st December 1999.

Article 4 of the Order deletes paragraph 3(aa) in article 4 of the Input Tax Order. The paragraph concerns the input tax margin scheme for cars contained in paragraph 4 of article 7 of the Input Tax Order. As the scheme is abolished by virtue of article 6 of this Order, paragraph 3(aa) is no longer necessary. This change takes effect from 1st March 2000.

Article 5 of the Order amends article 5 of the Input Tax Order which requires people to account for VAT on the profit margin when they dispose of goods used for business entertainment, on which they have not recovered input tax (the “input tax margin scheme”). The amendment abolishes that requirement. The input tax margin scheme remains for disposals of services used for business entertainment. This change takes effect from 1st March 2000.

Article 6 of the Order abolishes a similar input tax margin scheme for cars in paragraph 4 of article 7 of the Input Tax Order. The input tax margin schemes for goods are replaced by a new exemption in the Value Added Tax (Supplies of Goods where Input Tax cannot be recovered) Order 1999 (S.I. 1999/2833). This change takes effect from 1st March 2000.

Article 6 of the Order also inserts a new sub-paragraph (aa) into paragraph (2) of article 7 of the Input Tax Order. The new sub-paragraph removes the stock in trade of a motor manufacturer or dealer from the scope of the input tax restriction on cars. Any private use of such vehicles will be subject to an output tax charge by virtue of paragraph 5(4) of Schedule 4 VAT Act 1994. This change takes effect from 1st December 1999.