HMRC is consulting (until 17 August 2021) on the proposed revocation of the Value Added Tax (Treatment of Transactions) Order, SI 1992/630. The Order provides for transactions made under salary sacrifice arrangements to be treated as neither a supply of goods nor services. It was originally introduced to give effect to a tribunal decision which found that, where an employee accepted lower wages in exchange for the supply of a motor car, the amount of salary sacrificed did not constitute consideration, and therefore no VAT was due.
The proposed revocation will ensure government departments cannot use the legislation to give themselves a VAT recovery advantage over other taxpayers. The change responds to what HMRC terms an ‘adverse decision’ of the Court of Appeal in Northumbria Healthcare NHS Foundation Trust [2020] STC 1720) which resulted in the NHS Trust obtaining a full deduction of VAT on its employees’ own private vehicles.
HMRC is consulting (until 17 August 2021) on the proposed revocation of the Value Added Tax (Treatment of Transactions) Order, SI 1992/630. The Order provides for transactions made under salary sacrifice arrangements to be treated as neither a supply of goods nor services. It was originally introduced to give effect to a tribunal decision which found that, where an employee accepted lower wages in exchange for the supply of a motor car, the amount of salary sacrificed did not constitute consideration, and therefore no VAT was due.
The proposed revocation will ensure government departments cannot use the legislation to give themselves a VAT recovery advantage over other taxpayers. The change responds to what HMRC terms an ‘adverse decision’ of the Court of Appeal in Northumbria Healthcare NHS Foundation Trust [2020] STC 1720) which resulted in the NHS Trust obtaining a full deduction of VAT on its employees’ own private vehicles.
