Vehicles for the Disabled: VAT Rating (Hansard, 24 January 1996)

§ The Minister of State, Department of Social Security (Lord Mackay of Ardbrecknish)
My Lords, before I answer the Question perhaps I may congratulate the noble Viscount on his return to us and wish him every success.

Noble Lords
Hear, hear!

§ Lord Mackay of Ardbrecknish
My Lords, it remains the Government's policy to retain the present VAT reliefs relating to motor vehicles for disabled people. Those include relief for vehicles specially designed for use by disabled people, and vehicles supplied either to charities providing care or medical or surgical treatment, or to certain other eligible bodies which pay for the goods wholly from voluntary contributions or charitable funds.

§ Viscount Ingleby
My Lords, that being so, why is VAT at present payable on the Venturer, described as a cross-country wheelchair designed for disabled people?

§ Lord Mackay of Ardbrecknish
My Lords, the question of defining what is eligible for relief is quite difficult. There are, so to speak, two hurdles over which a vehicle must jump, if I may use that expression, in order to obtain zero rating. First, it has to be a motor vehicle as defined. Off-road vehicles are not regarded as motor vehicles. Secondly, it must be able to carry people who are seated in wheelchairs. It is for those reasons—principally for the first reason—that the off-road vehicle, which I know the noble Viscount uses with such success, is not considered eligible for zero rating.

§ Lord Ashley of Stoke
My Lords, judging from that answer, is there not a case for reconsidering the criteria for help for exemption from VAT? One criterion should be that if it helps disabled people and cannot be exploited by others there should be exemption. The point raised by the noble Viscount is surely within that category.

§ Lord Mackay of Ardbrecknish
My Lords, I very much appreciate the use to which some people can put an off-road vehicle, especially if they are interested in carrying out pursuits in the countryside. However, with 1031 regard to the law on zero rating, the position is that the vehicle must, as I said, obey these two criteria. It must be a motor vehicle as defined—that really means a road vehicle—and it must also be able to carry disabled people, either as passengers or drivers, in their wheelchairs. I am afraid that the vehicle in which the noble Viscount, Lord Ingleby, is interested does not obey either of those criteria.

§ Lord Boyd-Carpenter
My Lords, is not the defect of the tax called VAT that it falls on all kinds of areas where it is desirable that there should be expenditure and falls heavily on them? Is that not an inherent defect of VAT?

§ Lord Mackay of Ardbrecknish
My Lords, I do not think that Question Time is quite the time, especially on this rather narrow issue, to discuss the merits of direct or indirect taxation. I know that many of us on this side feel strongly that there are considerable merits in indirect taxation; taxation, that is, on people's expenditure. If one is to make exceptions to VAT—by zero rating or exemption—it has to be done on very tight grounds. Otherwise we would go back to the old sport which, as some of your Lordships will remember, we had on purchase tax.

§ Lord Monkswell
My Lords, can the Minister say what action would be required to ensure that zero rate of VAT on the particular vehicle referred to can be levied? Does it require primary legislation, secondary legislation, or could it be done by Inland Revenue regulation?

§ Lord Mackay of Ardbrecknish
My Lords, I regret to tell the noble Lord that the question of extending zero rating is a good deal more complicated even than the choice of school to which you send your child. One cannot extend zero rating in this country or any other European country because that would be a breach of the sixth VAT directive.

§ Lord Tebbit
My Lords, is my noble friend aware that, although he is a very popular Minister, the reply that he gave is a very unpopular one? Does he agree that the vehicle in question was developed specifically for disabled people and was developed in order that disabled people could enjoy the open countryside in the same way as those of us who are on two legs are privileged to do? Was it not developed for that purpose with the aid of a grant from British Telecom, that being a condition of its development? Will he accept that it must surely be possible to change those regulations, so that a vehicle designed for disabled people—which it clearly is—should qualify for zero rating whatever the bureaucrats in the Treasury or Brussels say?

§ Lord Mackay of Ardbrecknish
My Lords, it is easy enough for my noble friend now to talk about regulations in that way. I do not suppose that he thought about them like that when he had to carry such responsibilities, though carried jointly so far as concerns the Treasury. The point I want to make is that in the advertising for the vehicle, though its value for people who are disabled is mentioned, the pictures of the 1032 vehicle lead me to believe that it is not specially adapted to allow people in wheelchairs to use it, be carried in it or drive it. That is one of the fundamental conditions which a vehicle has to pass before it can be considered eligible for zero rating. If someone were to buy the vehicle and adapt it in order to carry a wheelchair, the adaptations for that vehicle—or any other vehicle for that matter—would in fact fall to be zero rated.

§ Lord Peston
My Lords, I do not want to intervene on the question of the noble Lord's popularity. However, I find his answers puzzling. It seems to me that the points that have been made nearly cover the definition. Is the Minister not willing at least to go hack to his right honourable friend the Chancellor of the Exchequer and say that this vehicle is clearly for disabled people, as the noble Lord, Lord Tebbit, said? Will he accept that it is not a matter of the modification being free of VAT but that the vehicle ought to be free from VAT? It seems to me that the House would like him to say that we ought to look at this matter, given the arguments that have been put forward.

§ Lord Mackay of Ardbrecknish
My Lords, I looked very carefully at this matter when I studied the Question and indeed the Answer. I come back to the point I made. It is certainly not a road vehicle—nobody argues about that. But a second point is that, while it may be a very good vehicle for a disabled person, it is certainly not exclusively designed for a disabled person and any reading of the advertising material would certainly draw me to that conclusion. My last point, which I make again, is that in order to fall within the definitions, which have to be drawn in order to keep the area moderately tight so far as concerns taxation, the unit should carry someone in a wheelchair, which is one of the fundamental definitions that allow for zero rating.

§ Viscount Ingleby
My Lords, may I suggest to the Minister that he listen to the makers, to whom I have spoken? They tell me quite plainly that it is possible to adapt this machine to carry a disabled person in a wheelchair.

§ Lord Mackay of Ardbrecknish
My Lords, if a vehicle were to be adapted to take a wheelchair in situ, certainly the adaptations upon it would be zero rated for VAT purposes. It does not get us away from the first Question, which is that it still would not be a road vehicle and so the whole vehicle would not be zero rated.

Baroness Darcy (de Knayth)
My Lords, perhaps I may narrow down the question put by the noble Lord, Lord Boyd-Carpenter. Is there not a case for at least zero rating all equipment supplied to organisations which supply welfare services under the Value Added Tax Act l 994—I believe that it is Part II of Schedule 9?

§ Lord Mackay of Ardbrecknish
My Lords, the noble Baroness takes me a good deal wider than the original Question. There are a considerable number of VAT helps and advantages for disabled people. indeed, the total cost of the various zero rating advantages that are available for disabled people comes to something 1033 like £150 million a year. So there are some considerable advantages already on many of the goods bought for disabled people and, as I said about motor vehicles, for the alterations that are made to a motor vehicle to enable it to carry a disabled person.