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In the 2014 Chancellor’s Budget it was announced that the Government would look to reform the VAT relief on the supply of vehicles to disabled persons. This follows widespread criminal activity as well as uncertainly with the law for businesses and disabled people.

The consultation asks for views on HMRC’s proposed reform of the law. The proposals aim to ensure that only people entitled to the relief can claim it and to tighten the rules to stop abuse.


To qualify for the VAT relief, vehicles must be ‘substantially and permanently’ adapted. Although following tax tribunal cases the adaption may be very simple such as a steering wheel knob. VAT zero rate relief was introduced in 1982 to help offset the cost of adaptions required to accommodate a disabled driver or passenger.

HMRC have become concerned that the relief does not serve its purpose as most vehicles where relief is claimed are high end luxury cars with minor easily removable adaptions. This also means the cost of adaptions are low compared to the tax relief claimed. Further, as the adaptions are easily removed with little impact on the vehicle itself, those vehicles subsequently retail fairly easily with no impact on their value. This means that the purchaser can make a significant profit on the vehicle with the 20% VAT relief.This has led to abuse of the relief whereby the vehicles are purchased with the sole aim to resell at a profit.

In addition to this, legitimate suppliers of vehicles such as franchised dealers are struggling to apply the law without exposing themselves to VAT assessments and penalties for incorrectly applying the relief.

Current VAT Relief

Supply of an adapted motor vehicle can be VAT zero rated when it is supplied to a disabled person who usually uses a wheelchair or stretcher providing the following conditions are met:

  • The vehicle seats no more than 12 people including the driver.
  • The vehicle has been designed or substantially and permanently adapted to enable disabled wheelchair (or stretcher) user to enter, drive or otherwise be carried in the vehicle.
  • The vehicle is for domestic or personal use of a disabled user only.

A disabled wheelchair user in this instance is someone who is defined as permanently reliant on a wheelchair.

To qualify for relief a vehicle must be substantially adapted and the adaption should require significant work to remove. The vehicle should also allow for the wheelchair user to take the wheelchair with them into the vehicle. Storage for a folded wheelchair in a boot would not be sufficient.

Problems with the Relief

Some dealers are not meeting the requirements of the relief as they are only fitting low cost adaptions which are easily removed.In addition some disabled people have become concerned that they are being turned away by some dealers who do not have the facilities to make significant adaptions to vehicles.

For dealers, the interpretation of ‘substantially and permanently’ has become problematic. Also some dealers have felt pressurised into zero rating vehicles having been accused of discrimination when they point out the vehicle does not qualify. Further, dealers have been subjected to disabled wheelchair users friends and family using the relief to buy vehicles for themselves.

On a much wider basis HMRC and the Police have found the relief being abused by individuals and organisations purchasing expensive vehicles with minor adaptions to resell at a profit. Criminal gangs have also exploited this to launder money and fund other illegal activity.


The Government wants to address the abuses but at the same time ensure disabled people who need substantial adaptions to a vehicle can still get them. The Government have made 8 proposals, of which proposals 1, 3, 4 and 5 will be of interest to dealers. Below is the relevant proposals and accompanying consultation questions.

Proposal 1 – Reform the VAT zero rate for adapted motor vehicles for disabled wheelchair users.

Question 1 – Do you agree that reform of the relief is needed? If not, why not?

Proposal 3– Define the terms ‘substantially and permanently’ in the legislation.

Question 4 – Do you agree that a rule specifying a minimum cost of adaptions, of 20% of the cost of the vehicle, should be introduced? If not, what suggestions do you have for defining the ‘substantial adaption’ of a vehicle?

Question 5 – What features do you think a motor vehicle that has been substantially adapted, to enable a disabled wheelchair user to enter and drive or enter and travel in, should include?

Question 6 – What adaptions are generally needed by wheelchair users to use a vehicle and/or carry their wheelchairs?

Proposal 4Require suppliers to submit details of zero rated motor vehicle sales.

Currently voluntary scheme but with very low take up. Mandatory scheme would increase compliance costs for dealers.

Question 7 – Would motor dealers be generally supportive of supplying information on zero rates sales to HMRC?

Question 8 – What additional administrative burden would this create for dealers.

Question 9– Do you have any alternative proposals that would enable HMRC to monitor zero rates sales?

Proposal 5Make the use of eligibility declarations mandatory.

Making declaration mandatory and introducing penalties to false declarations should tighten up the system and reduce fraud.

Question 10 – Do you agree that a mandatory eligibility declaration should be made for all purchases of zero rated adapted vehicles?

Question 11 – Do you agree that a penalty should be chargeable on false declarations?

Responding to the consultation

Response date Friday 19 September 2014

Responses to:


Post: Adapted Motor Vehicles Consultation

Room G66

100 Parliament Street



Posted by Sue Robinson on 11/07/2014