As announced at Autumn Statement 2016, the government intends to legislate in Finance Bill 2017 to tackle abuse of VAT relief on adapted cars for wheelchair users. Currently wheel chair users obtain a VAT zero-rate relief on vehicles. It was found that people were abusing the legislation by obtaining a VAT zero-rate relief on vehicles with minor adaptions and later reversing the changes to sell the vehicle on for profit. A consultation in 2014 set out options to amend the scheme. Respondents were supportive of the need to make changes in order to tackle such abuse.

The legislation will limit the number of vehicles that can benefit from the relief in a given period and make mandatory the requirement to submit written declarations to HMRC. Those in breach of these new requirements may be denied the benefit of the zero rate or may be subject to a section 62, Value Added Tax Act 1994, penalty if the declaration they make is incorrect. The changes will take effect from 1 April 2017.

A copy of the draft legislation (see clause 43) can be found here.

A copy of the Policy Paper published on 5 December 2016 can be found here.