On 14 March 2016, the UK requested authorisation to continue to apply a derogation measure concerning the right of deduction of VAT borne on the hire or lease of motor cars also used for private purposes. The derogation is set out in Council Decision 2013/681/EU and was due to expire on 31 December 2016.

By a Council Implementing Decision adopted on 27 October 2016, the Council of the European Union agreed to the continuation of the UK’s VAT derogation permitting the UK to restrict input tax recovery on car leasing costs to 50% where the car is available for private use. The derogation also relieves the business of the obligation to account for VAT on the supply of the car for private use. The derogation will now continue until 31 December 2019.

A copy of the Council Implementing Decision is available to view here.