HMRC has published draft legislation relating to the VAT treatment for salary sacrifice arrangements applying to government departments and NHS bodies that supply cars to their employees.
The draft legislation makes it clear that HMRC do not expect this measure to have any impact on salary sacrifice schemes in the private sector.
It proposes that from 21 October 2021, measures will be put in place to repeal the VAT (Treatment of Transactions) Order 1992, ensuring government departments and NHS bodies cannot exploit the legislation to give themselves a VAT recovery advantage over other taxpayers.
It has also set out that the VAT order is revoked from any supplies made after 21 October unless they are from contracts entered before 21 October that are not longer than three years and “the employer has reduced the price of the supply as a direct and sole consequence of being refunded the amount of VAT chargeable on the supply”.
The BVRLA published a news story Repeal of VAT Order for salary sacrifices on 8 December 2020.
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