A garage is VAT registered and a customer has asked them to fit some new tyres and alloy wheels to their vehicle. The customer is disabled and has provided them with an exemption certificate stating that they should not charge VAT to them. The garage is confident that VAT at the standard rate of 20% should be charged but the customer is adamant that this is not the case and it should be exempt. Who is correct?
A disabled person can get VAT relief on certain supplies to them but the scope of the relief is narrowly drawn. VATA 1994, Schedule 8, Group 12 sets out the goods and services that can be zero rated
Specifically, item 2(f) states that the supply to a handicapped person for domestic or personal use of motor vehicles designed or substantially and permanently adapted for the carriage of a person in a wheelchair or on a stretcher and of no more than 11 other persons is zero rated.
In addition, item 2(h) states that parts and accessories designed solely for use in or with goods described in paragraph (a) to (g) are also zero rated.
Therefore, if the customer is simply upgrading the wheels and tyres for cosmetic reasons, then as the new tyres and alloys that the customer has asked to be fitted are not designed solely for use in an adapted vehicle your client is correct to charge VAT at the standard rate.
However, if the tyres and alloys are being supplied and fitted as part of a repair, for example following an accident, or routine maintenance, then provided your client holds an eligibility declaration from the customer and is satisfied that the vehicle was zero rated to the customer when it was initially supplied, then the repair or maintenance including the parts will be zero rated under item 5.
HMRC published Helpsheet VAT1616 in 2012 to help businesses and customers to interpret the rules on adapted vehicles. To view the helpsheet, click here.