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GAP Group has succeeded in an appeal against HMRC relating to the rate of VAT charged on red diesel supplied in its equipment for hire.
The Scottish Plant Owners Association (SPOA) described it as a landmark victory that could reverberate across the whole plant hire sector. Companies may have been charging a higher rate of VAT on red diesel than necessary, depending on their specific circumstances.
The case centred around GAP’s total fuel revenue in the financial years March 2017 to March 2020. HMRC maintained that the supply of plant machinery and the supply of diesel should be taxed together at a VAT rate of 20% as a single supply.
However, GAP argued that these were two separate transactions for VAT purposes, where the rate of VAT on the fuel, in this case red diesel, should have been just 5%.
While the construction industry no longer has access to rebated red diesel, it might be worth checking back into old accounts.
John Sibbald, president of the SPOA, said: “The SPOA welcomes this decision by the First Tier Tribunal. We are fortunate to have a member that has the resources to mount an appeal of this magnitude. The reality, however, is that lots of our members are SMEs and have simply followed the very limited and, in some cases, misleading guidance available. As a result, they could very easily have charged VAT at the incorrect level. The SPOA is grateful to member GAP Group for its actions in both bringing this case against HMRC and for highlighting this issue to the plant hire industry."
He added: “In the last 24 hours HMRC has confirmed that there will be no appeal to this decision. I would urge all plant hire companies to take specific advice from tax experts if they are concerned about the level of VAT charged on fuel.”
Full details of the case can be read here: financeandtax.decisions.tribunals.gov.uk//judgmentfiles/j12899/TC%2008991.pdf
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