HMRC have not been able to finalise their review of salary sacrifice lease cars in the NHS to date, but have recognised the need to address the situation by issuing some interim guidance which should be implemented from the October return.
Please note, that whilst HMRC make reference to the guidance applying from 1 January 2012, this will of course be subject to the normal 4 year cap – so no need to adjust quite as far back as January 2012.
The key points are as follows:
1. Lease Cars provided by NHS Trust to employees under Salary Sacrifice – Apply a 50% block to input VAT for lease cars provided to employees to account for private use. No output tax will be due in respect of the sacrificed salary. The unblocked 50% will be available for recovery under COS (providing the normal conditions are met). Note: this is not the application of SI1992/3222 (The blocking order) but it has been agreed that it made sense for the NHS to utilise a similar simplification.
2. Where the NHS provides lease cars to non-employees under salary sacrifice, the above 50% restriction cannot be applied. Output tax should be accounted for, and input tax can be recovered in full.
3. Where a Trust operates a Salary deduction scheme, the input VAT can be recovered in full under COS, though output tax is due on the contribution made by the employee towards the cost of the lease car. This is to account for the private use of the vehicle.
4. Pool cars and commercial vehicles will be subject to the normal conditions for recovery under COS 26.
5. Lease cars provided by a Trust without any salary deduction or sacrifice will still be liable to output tax for the private use, unless the 50% input restriction has been applied.
If you have any questions relating to the above, please feel free to call our FREE VAT Helpline on 01732 868 266 or speak to your dedicated Consultant.