GAP Group wins ‘landmark’ tax appeal in UK

UK rental company GAP Group has won an appeal against tax authorities for a bill of more than £844,000 relating to value added tax (VAT) on red diesel from March 2017 to March 2020.

A judge in Edinburgh ruled in GAP’s favour after it appealed the HMRC tax bill. GAP argued that fuel was a separate transaction from the rental of equipment and should be charged at the lower VAT rate of 5%, rather than the standard 20% rate on the rental contract.

Wacker Neuson site dumpers in GAP Group’s fleet. (Photo: GAP Group)

The tribunal ruled that the provision of plant and red diesel constituted multiple supplies for VAT purposes, and should be charged at different rates.

HMRC will not appeal the decision, said the Scottish Plant Owners Association (SPOA).

SPOA, which has 350 members who own and rent equipment, described it as a “landmark victory” that could have repercussions for the whole plant hire industry where companies may have been charging a higher rate of VAT on red diesel than necessary.

John Sibbald, president of the SPOA, welcomed the decision; “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…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 tribunal ruling can be read here.