VALUE ADDED TAX Citation and commencement 1 This Order may be cited as the Value Added Tax (Cars) Order 1992 and shall come into force on 1st January 1993. Interpretation 2 1 In this Order– “the Act” means the Value Added Tax Act 1994 ; “the Manx Act” means the Value Added Tax Act 1996 ; ... “finance agreement” means an agreement for the sale of goods whereby the property in those goods is not to be transferred until the whole of the price has been paid and the seller retains the right to repossess the goods; ... “Motor car” means any motor vehicle of a kind normally used on public roads which has three or more wheels and either— is constructed or adapted solely or mainly for the carriage of passengers; or has to the rear of the driver’s seat roofed accommodation which is fitted with side windows or which is constructed or adapted for the fitting of side windows; but does not include— vehicles capable of accommodating only one person; vehicles which meet the requirements of Schedule 6 to the Road Vehicles (Construction and Use) Regulations 1986 and are capable of carrying twelve or more seated persons; vehicles of not less than three tonnes unladen weight (as defined in the Table to regulation 3(2) of the Road Vehicles (Construction and Use) Regulations 1986); vehicles constructed to carry a payload (the difference between a vehicle’s kerb weight (as defined in the Table to regulation 3(2) of the Road Vehicles (Construction and Use) Regulations 1986) and its maximum gross weight (as defined in that Table)) of one tonne or more; caravans, ambulances and prison vans; vehicles constructed for a special purpose other than the carriage of persons and having no other accommodation for carrying persons than such as is incidental to that purpose; “auctioneer” means a person who sells or offers for sale goods at any public sale where persons become purchasers by competition, being the highest bidders. 1A In this Order a reference to the importation of goods is to be read as including a reference to the acquisition of goods in Northern Ireland from a member State, and references to goods being imported, or tax being charged on an importation, are to be construed accordingly. 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Revocations 3 The provisions specified in the first column of the Schedule to this Order are hereby revoked to the extent specified in the second column of that Schedule. Treatment of transactions 4 1 Subject to paragraphs (1A) to (2) below, each of the following descriptions of transactions shall be treated as neither a supply of goods nor a supply of services– a the disposal of a used motor car by a person who repossessed it under the terms of a finance agreement, where the motor car is in the same condition as it was in when it was repossessed; b the disposal of a used motor car by an insurer who has taken it in the settlement of a claim under a policy of insurance, where the motor car is disposed of in the same condition as it was in when it was so taken; c the disposal of a motor car for no consideration .... d services in connection with a supply of a used motor car provided by an agent acting in his own name to the purchaser of the motor car the consideration for which is taken into account by virtue of article 8(8) below in calculating the price at which the agent sold the motor car; e services in connection with the sale of a used motor car provided by an auctioneer acting in his own name to the vendor or the purchaser of the motor car the consideration for which is taken into account by virtue of article 8(9) below in calculating the price at which the auctioneer obtained (or as the case may be) sold the motor car ; f a relevant supply of services by a taxable person to whom a motor car has been let on hire or supplied or by whom a motor car has been ... imported. 1A Paragraph (1) above shall not apply in relation to a case falling within paragraph (1)(a) to (c) above unless the tax on any previous supply ... or importation was wholly excluded from credit under section 25 of the Act. 1AA Paragraph (1)(a) above shall not apply where adjustment, whether or not made under regulation 38 of the Value Added Regulations 1995, has taken account, or may later take account, of VAT on the initial supply under the finance agreement as a result of repossession and the motor car delivered under that agreement was delivered on or after 1 st September 2006. 1B Paragraph (1) above shall not apply in relation to a case falling within paragraph (1)(f) above unless the tax on any previous letting on hire, supply ... or importation was wholly or partly excluded from credit under section 25 of the Act. 1C For the purposes of paragraph (1)(f) above a relevant supply of services is— a the letting on hire of a motor car to any person for no consideration or for a consideration which is less than that which would be payable in money if it were a commercial transaction conducted at arms length; or b the making available of a motor car (otherwise than by letting it on hire) to any person (including, where the taxable person is an individual, himself, and where the taxable person is a partnership, a partner) for private use, whether or not for a consideration. 2 Nothing in paragraph (1)(a) or (b) above shall be construed as meaning that a transaction is not a supply for the purposes of paragraph 3(1)(a) of Schedule 9ZA to the Act . 4A Paragraph 5(4) of Schedule 4 to the Act shall not apply in relation to a motor car to which article 5 below applies which is used or made available in circumstances where, but for the operation of that paragraph, it would be treated by virtue of that article as supplied to and by a taxable person. Self-supplies 5 1 This article applies to any motor car— a which has been produced by a taxable person otherwise than by the conversion of a vehicle obtained by him; b which has been produced by the taxable person by the conversion of another vehicle (whether a motor car or not) and in relation to which the condition in paragraph (2) below is satisfied; ... c which was supplied to, ... or imported by, a taxable person and in relation to which the condition in paragraph (2) below is satisfied ; or d which was transferred to a taxable person as an asset of a business or part of a business in the course of the transfer of that business or part of a business as a going concern— in circumstances where the transfer was treated as neither a supply of goods nor a supply of services by virtue of an Order made or having effect as if made under section 5(3) of the Act; in the hands of the transferor or any predecessor of his the motor car was one to which this article applied by virtue of sub-paragraph (a), (b) or (c) above; and the motor car has not been treated as supplied by virtue of this article to and by the transferor or any of his predecessors. 2 The condition referred to in paragraph (1)(b) and (c) above is that the tax on the supply to, ... or importation by, the taxable person of the motor car or the vehicle from which it was converted, as the case may be, was not wholly excluded from credit under section 25 of the Act. 2A For the purposes of paragraph (1)(d) above a person is a predecessor of a transferor if— a he transferred the motor car as an asset of a business or part of a business which he transferred as a going concern— i to the transferor, or ii where the motor car has been the subject of more than one such transfer, to a person who made one of those transfers; and b the transfer of the motor car was treated as neither a supply of goods nor a supply of services by virtue of any Order made or having effect as if made under section 5(3) of the Act. 3 Where a motor car to which this article applies— a has not been supplied by the taxable person in the course or furtherance of a business carried on by him; and b is used by him such that had it been supplied to, or imported ... by, him at that time his entitlement to credit under section 25 of the Act in respect of the VAT chargeable on such a supply or importation would have been wholly excluded by virtue of article 7 of the Value Added Tax (Input Tax) Order 1992, it shall be treated for the purposes of the Act as both supplied to him for the purposes of a business carried on by him and supplied by him for the purposes of that business. 6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Article 5 above shall apply in relation to any bodies corporate which are treated for the purposes of section 43 of the Act as members of a group as if those bodies were one person, but any motor car which would fall to be treated as supplied to and by that person shall be treated as supplied to and by the representative member. Relief for second-hand motor cars 8 1 Subject to complying with such conditions (including the keeping of such records and accounts) as the Commissioners may direct in a notice published by them for the purposes of this Order or may otherwise direct, and subject to paragraph (3) below, where a person supplies a used motor car which he took possession of in any of the circumstances set out in paragraph (2) below, he may opt to account for the VAT chargeable on the supply on the profit margin on the supply instead of by reference to its value. 2 The circumstances referred to in paragraph (1) above are that the taxable person took possession of the motor car pursuant to— a a supply in respect of which no VAT was chargeable under the Act or under Part I of the Manx Act; b a supply on which VAT was chargeable on the profit margin in accordance with paragraph (1) above, or a corresponding provision made under the Manx Act ... or a corresponding provision of the law of a member State where the motor car is removed to Northern Ireland ; bb a supply received before 1st March 2000 to which the provisions of article 7(4) of the Value Added Tax (Input Tax) Order 1992 applied; c a de-supplied transaction, other than an article 5 transaction; d subject to paragraph (2A) below, an article 5 transaction. 2A An article 5 transaction does not fall within sub-paragraph (d) of paragraph (2) above unless the taxable person has a relevant predecessor in title. 3 This article does not apply to— a a supply which is a letting on hire; b the supply by any person of a motor car which was produced by him, if it was neither previously supplied by him in the course or furtherance of any business carried on by him nor treated as so supplied by virtue of article 5 above; c any supply if an invoice or similar document showing an amount as being VAT or as being attributable to VAT is issued in respect of the supply; d . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . e the supply by any person of a used motor car if the person took possession of that motor car in Great Britain, or the Isle of Man, and it is removed to Northern Ireland. 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Subject to paragraph (6) below, for the purposes of determining the profit margin— a the price at which the motor car was obtained shall be calculated as follows— i (where the taxable person took possession of the used motor car pursuant to a supply) in the same way as the consideration for the supply would be calculated for the purposes of the Act; ii (where the taxable person is a sole proprietor and the used motor car was supplied to him in his private capacity) in the same way as the consideration for the supply to him as a private individual would be calculated for the purposes of the Act; iii (where the taxable person took possession of the motor car pursuant to a de-supplied transaction, other than an article 5 transaction) by taking the price he paid pursuant to the transaction; iv (where the taxable person took possession of the motor car pursuant to an article 5 transaction) by taking the price at which his relevant predecessor in title obtained the motor car; b the price at which the motor car is sold shall be calculated in the same way as the consideration for the supply would be calculated for the purposes of the Act ; c . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Subject to paragraph (7) below, where the taxable person is an agent acting in his own name the price at which the motor car was obtained shall be calculated in accordance with paragraph 5(a) above but the selling price calculated in accordance with paragraph 5(b) above shall be increased by the amount of any consideration payable to the taxable person in respect of services supplied by him to the purchaser in connection with the supply of the motor car. 7 Instead of calculating the price at which the motor car was obtained or supplied in accordance with paragraph (6) above, an auctioneer acting in his own name may— a calculate the price at which the motor car was obtained by deducting from the successful bid the amount of the commission payable to him under his contract with the vendor for the sale of the motor car; b calculate the price at which the motor car was supplied by adding to the successful bid the consideration for any supply of services by him to the purchaser in connection with the sale of the motor car, in either (or both) cases excluding the consideration for supplies of services that are not chargeable to VAT. 8 For the purposes of this article— “article 5 transaction” means a transaction which is a de-supplied transaction by virtue of a provision of article 5 of the Value Added Tax (Special Provisions) Order 1995 or a corresponding provision made under the Manx Act ; “de-supplied transaction” means a transaction which was treated by virtue of any Order made or having effect as if made under section 5(3) of the Act or under the corresponding provisions of the Manx Act as being neither a supply or goods nor a supply of services. 9 For the purposes of this article a person is a relevant predecessor in title of a taxable person if— a he is the person from whom the taxable person took possession of the motor car and himself took possession of it pursuant to a transaction within any of sub-paragraphs (a) to (c) of sub-paragraph (2) above; or b where the motor car has been the subject of a succession of two or more article 5 transactions (culminating in the article 5 transaction to which the taxable person was a party), he was a party to one of those transactions and himself took possession of the motor car pursuant to a transaction within any of sub-paragraphs (a) to (c) of sub-paragraph (2) above. Relief for second-hand motor cars removed from Northern Ireland to Great Britain 8A Article 8 has effect as if in paragraph (1)— 1 after “in any of the circumstances set out in paragraph (2) below” there were inserted “ and the supply involves the removal of a motor car from Northern Ireland to Great Britain ” ; and 2 for “VAT chargeable on the supply” there were substituted “ VAT chargeable on the removal ” . Irvine Patnick Tim Boswell Two of the Lords Commissioners of Her Majesty’s Treasury