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Where Taxpayers and Advisers Meet
LITRG concern at new restrictions on VAT relief for disabled people buying cars
16/02/2017, by Low Incomes Tax Reform Group, Tax Articles - VAT & Excise Duties
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The LITRG raises issues about a tax change that could increase the costs for disabled people of changing their motor vehicle, preventing many from changing to a more suitable one.


From 1 April 2017, the Government will restrict the availability of zero-rate VAT for the purchase of adapted motor vehicles for eligible disabled users to one car every three years. It says there has been abuse of this relief in the past, with some people purchasing numerous adapted vehicles in a single year, removing the adaptations and then selling the vehicles on for a profit. The number of vehicles that can be purchased under this relief will be restricted to one every three years. There are some instances when this limit can be exceeded, such as if an individual’s car is written off or stolen, or if the vehicle has ceased to be suitable for the disabled person’s use because of changes in the person’s condition. These exceptions to the limit will be covered in primary legislation.

LITRG suggestion of an alternative and preferable solution

The Low Incomes Tax Reform Group (LITRG) suggests that instead of restricting the relief to tackle the tax abuse and, as a result, potentially raising the cost of motor vehicle ownership for some disabled people who genuinely need it, HMRC should improve the administration of the existing relief by gathering and matching data from car dealers and licensing authorities, using modern technology and then taking compliance action. This could be largely automated to avoid putting much strain on HMRC’s staff resources.

LITRG concerns

The LITRG welcomes the relaxations that are planned within the new rules, but believes these do not go far enough to stop the lifestyle of genuine users of this important tax relief being adversely affected.

The group particularly questions why there will be an exception to the restrictions if a person’s condition changes, but not for life changes. It seems unduly harsh that a disabled person should be denied tax relief on the extra costs they incur when changing their motor vehicle, for instance in a simple situation such as their family having grown so that they require a larger vehicle. To deny the relief in circumstances such as a baby arriving would seem to be inequitable.

LITRG is also hugely concerned at the lack of a right of appeal within the new provisions, thus making HMRC the sole judge of whether a vehicle continues to be suitable relative to the disabled user’s condition. The group questions whether HMRC staff have the expertise to make such judgements. It is also a matter of concern that the user will be required to disclose potentially intrusive personal information in order that HMRC can make that judgement.

The proposals seem very much like a blunt instrument to prevent abuse, but – regrettably – may equally prevent genuine users from obtaining relief either because they do not qualify, or because the rules are so complex that they think they do not qualify, or perhaps even the threat of a penalty for getting it wrong puts them off.

The Government is also making the use of eligibility declaration forms which are available on GOV.UK mandatory. This form clarifies exactly what information an individual needs to provide to support their claim to a zero-rated supply. Motor dealers are also required to send information regarding these zero-rated sales to HMRC. The information required will be specified by a public notice. HMRC will use this information to monitor the exemption to guard against abuse and fraud.

According to government estimates, changes to the scheme will affect around 6,000 car dealers that sell adapted motor vehicles.

Useful links

Government policy paper: VAT relief on adapted motor vehicles for qualifying disabled users
LITRG’s full response to the proposals contained in the draft Finance Bill 2017

About The Author

The Low Incomes Tax Reform Group (LITRG) is an initiative of the Chartered Institute of Taxation to give a voice to those who cannot afford to pay for tax advice. LITRG comprises tax specialists from professional practice and the voluntary sector, from publishing and from HM Revenue & Customs, together with people from a welfare benefits and social policy background. Visit for further information.
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