§ Mr. SimpsonTo ask the Chancellor of the Exchequer what VAT regulations apply to the Motability scheme; and to what extent these differ from the regulations applying to the commercial sector(a) before and (b) after August. [5094]
§ Mr. Heathcoat-AmoryThe VAT Act 1994, schedule 8 group 12, items 14 and 15, allows zero-rating for the leasing of unused motor vehicles for a period of not less than three years to disabled people who are in receipt of the mobility component of the disability living allowance, and for the first sale of those vehicles after the end of the leasing period. Neither of these zero rates are restricted to supplies by Motability. Any car-leasing business whose sales consist predominantly of the provision of vehicles in these circumstances may take advantage of these zero rates, although to date only Motability has done so.
Motor dealers have always been able to buy back ex-lease cars from Motability free of VAT. In August, however, the VAT regulations governing the sale of second-hand motor vehicles changed. This has potential repercussions both for Motability and for the second-hand car market generally and so Customs and Excise will shortly be entering into discussions with all the interested parties.