Section 80 | Zero-rating of leases of vehicles to recipients of disability benefits

(1)VATA 1994 is amended as follows.

(2)In Schedule 8, in Group 12 (drugs, medicines, aids for the disabled, etc), omit item 14.

(3)In consequence of the amendment made by subsection (2), in that Group—

(a)for item 15 substitute—

15

(1)The sale of a motor vehicle that had been let on hire on relevant benefit terms, where such sale constitutes the first supply of the vehicle after the end of the period of such letting.

(2)A vehicle has been let on hire on relevant benefit terms if—

(a)the letting on hire was to a disabled person in receipt of—

(i)a relevant disability benefit by virtue of entitlement to the mobility component of that benefit,

(ii)an armed forces independence payment, or

(iii)mobility supplement,

(b)the letting was for a period of not less than 3 years,

(c)the vehicle was unused at the commencement of the period of letting, and

(d)the consideration for the letting consists wholly or partly of sums paid to the lessor by a relevant authority on behalf of the lessee in respect of—

(i)the mobility component of a relevant disability benefit,

(ii)armed forces independence payment, or

(iii)mobility supplement.

(3)For the purposes of paragraph (2)—

“relevant authority” means—

the Department for Work and Pensions,

the Ministry of Defence,

the Scottish Ministers, or

the Department for Communities in Northern Ireland;

“relevant disability benefit” means—

disability living allowance,

personal independence payment,

Child Disability Payment,

Adult Disability Payment, or

Scottish Adult Disability Living Allowance.

,

(b)omit note (6), and

(c)in note (7)—

(i)in the words before paragraph (a), for “14” substitute “15”,

(ii)in paragraph (aa), for “the corresponding provision having effect in Northern Ireland” substitute “Part 5 of the Welfare Reform (Northern Ireland) Order 2015”,

(iii)in paragraph (aaa), for “disability assistance for children and young people” substitute “Child Disability Payment”,

(iv)in paragraph (aab), for “disability assistance for working age people” substitute “Adult Disability Payment”,

(v)after that paragraph insert—

(aac)“Scottish Adult Disability Living Allowance” means a category of disability assistance for adults given in accordance with regulations made under section 31 of the Social Security (Scotland) Act 2018;

, and

(vi)for paragraph (b) substitute—

(b)“mobility supplement” is a mobility supplement within the meaning of—

(i)Article 20 of the Naval, Military and Air Forces Etc. (Disablement and Death) Service Pensions Order 2006, or

(ii)Article 25A of the Personal Injuries (Civilians) Scheme 1983.

(4)In Schedule 6 (valuation: special cases), after paragraph 11A insert—

11B

(1)This paragraph applies for the purposes of determining the value of a supply consisting of the letting on hire of a motor vehicle on relevant benefit terms.

(2)But this paragraph is to be ignored for the purposes of Schedule 1 (VAT registration).

(3)“Relevant benefit terms” is to be construed in accordance with paragraph (2) of item 15 in Group 12 in Schedule 8 (zero-rating).

(4)Any amount of consideration for the letting that falls within sub-paragraph (d) of that paragraph (payments of relevant benefits) is to be disregarded in determining the amount of the consideration for the purposes of calculating the value of the supply under this Act.

(5)The amendments made by this section have effect in relation to leases of motor vehicles commencing on or after—

(a)1 July 2026, or

(b)such later date as may be appointed in regulations made (before 1 July 2026) by statutory instrument by the Treasury.