Recovery of VAT on cars

HMRC has announced that the VAT ‘de-supply’ order, which treats the provision of cars under a salary sacrifice scheme as a non-supply is to be revoked ‘before autumn 2021’. Revenue & Customs Brief 19/2020 notes that the change will impact government departments and NHS bodies which supply cars to their employees under salary sacrifice arrangements.

The change aims to ensure that government departments and NHS bodies cannot exploit the legislation to give themselves a VAT recovery advantage over other taxpayers, following the Court of Appeal decision in HMRC v Northumbria Healthcare NHS Foundation Trust [2020] STC 1720.