GOVERNMENT PROTECTS MOTORISTS FROM VAT ON ROAD TOLLS

30 Dec 2002 04:00 AM

The Economic Secretary to the Treasury, John Healey, today confirmed the Government's intention to protect motorists from higher toll charges on account of VAT. Mr Healey said:

"As I made clear in my statement to Parliament, it is the Government's intention that motorists should not pay higher toll charges when VAT is introduced on privately operated tolls from 1 February 2003.

"When the European Court of Justice ruled that these tolls must bear VAT, the Government stated its intention that toll prices should not increase on account of the ECJ ruling. We remain firmly committed to this, and on 1 February 2003 motorists should not see any increase in the toll charges they pay as a result of the VAT change. Furthermore, from this date many business motorists will be able to recover the VAT content of the tolls they pay, making their actual costs cheaper.

"This is good news for motorists and good news for the toll operators involved, who from 1 February 2003 will also be able to recover the VAT paid on many of their costs."

On 1 February 2003, as a result of a European Court of Justice ruling, tolls payable to private sector operators for use of roads, road bridges or road tunnels will become subject to VAT. Whilst statutory toll charges levied by public bodies can remain free from VAT, other toll charges must be taxed.

All UK road tolls will remain free from VAT until 1 February 2003. From 1 February 2003, VAT-registered businesses will be entitled to recover the VAT charged on tolls, provided they have made the journeys in question in connection with their taxable activities and they hold the necessary evidence.

Notes for editors
1. Customs and Excise, Department for Transport and the Scottish Executive are consulting with all the toll operators involved to assist them in making the necessary changes to their operations.

2. The policy in the UK has been not to tax any toll charges paid by motorists, but on 12 September 2000 the European Court of Justice ruled, in cases against the United Kingdom, France, Holland, Greece and Ireland, that tolls levied by private sector undertakings should bear VAT. The Court also ruled that tolls levied by public bodies can remain free from VAT where they are levied under statute.

3. On the same day that the Court delivered its judgment, the Government gave a commitment to implement a scheme to offset the cost of VAT, when it is introduced on privately operated tolls (Customs & Excise press release PR 36/2000).

4. From 1 February 2003, tolls payable to use the following bridges and tunnels will include VAT, unless the toll operator is a small business with a turnover beneath the VAT registration threshold: - Aldwark Bridge
- Clifton Suspension Bridge
- Dunham Bridge
- Rixton and Warburton Bridge
- Severn River Crossing
- Skye Bridge
- Swinford Bridge
- Shrewsbury (Kingsland) Bridge
- Whitchurch Bridge
- Whitney on Wye Bridge
Customs will issue formal guidance in due course. The change will also affect tolls paid to use wholly private roads and bridges. There is, however, no formal record of these undertakings.

5. Business should not be burdened by any increase in paperwork as a result of these changes.

If using specific facts contained in this release please check the information is still current.

Issued by HM Customs and Excise Communications Division

For the attention of News Desks
Anyone with information about illegally imported drugs, tobacco or alcohol or about VAT fraud can speak to a Customs officer in complete confidence. Call Customs Confidential 24 hours a day on 0800 59 5000 www.hmce.gov.uk