The Value Added Tax (Cars) (Amendment) Order 1993

Explanatory Note

(This note is not part of the Order)

This Order, which comes into effect on 1 January 1994, amends the scope of the Value Added Tax (Cars) Order 1992 concerning the treatment for value added tax purposes of new and used motor cars. It amends Article 6 of that Order which concerns the self-supply of a motor car where an input tax deduction has been taken. It also amends Article 8 which concerns the output tax relief for second-hand motor cars.

Businesses leasing cars to private taxi firms, self-drive hire firms and driving schools are able to reclaim the tax on purchases of motor cars for this purpose. The Order ensures that tax is charged on the full selling price of these cars when sold by those businesses in their turn, by disapplying the margin relief in Article 8 (whereby the consideration for the sale is the excess of the selling price over the purchase price, if any). The Order also creates a self-supply where an input tax deduction has been taken, but the car has been put to a non-qualifying use.