Vehicle Excise and Registration Act 1994 schedule 2 paragraph 23

Exemption from vehicle excise duty for zero-rated VAT supplies

Paragraph 23 of schedule 2 sets out the conditions under which a vehicle supplied on a VAT zero-rated basis is exempt from vehicle excise duty, and what happens if that zero-rating is later withdrawn.

• A vehicle is exempt from vehicle excise duty if it was supplied by a VAT-registered person and the supply was zero-rated under section 30(8) of the Value Added Tax Act 1994.
• Both conditions must be met: the supplier must be a taxable person for VAT purposes, and the specific supply must have qualified for zero-rating.
• If the VAT that would otherwise have been due on the supply becomes payable because the zero-rating conditions are no longer satisfied, the vehicle is treated as never having been exempt from vehicle excise duty.
• This retrospective removal of the exemption also applies where the VAT would have become payable but for an authorisation or waiver granted under section 30(10) of the Value Added Tax Act 1994.