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Input tax restriction for private use of leased cars

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The European Commission has published its proposal to grant an extension of the UK’s VAT directive derogation permitting a 50% input tax deduction for leased cars not used entirely for business purposes. The current derogation expires on 31 December 2019.

The current derogation authorises the UK to apply a 50% restriction on the right to recover input tax on charges for the lease or long-term daily rental of cars not used exclusively for business purposes. The derogation correspondingly allows the UK not to treat the private use of leased business cars as supplies of services for consideration. It thus removes the need for the hirer or lessee to keep detailed private mileage records for each of these cars, or to account for the VAT on the private use.

The UK applied to the Commission for an extension of the derogation in April 2019. The Commission responded in May 2019 that it had all the information necessary to consider the request.

The Commission’s proposal for a Council implementing decision provides for an extension until 31 December 2022, or until the effective date of the UK’s withdrawal from the EU, if sooner.

The proposed decision now needs unanimous approval by the European Council.

See bit.ly/2qMphVD.

Issue: 1465
Categories: News
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