Proposal for a COUNCIL IMPLEMENTING DECISION authorising the United Kingdom in respect of Northern Ireland to apply a special measure derogating from Articles 16 and 168 of Directive 2006/112/EC on the common system of value added tax

1. This Explanatory Memorandum outlines a European Commission (‘Commission’) proposal, at the request of the United Kingdom (UK), to renew the existing derogation from Articles 16 and 168 of Directive 2006/112/EC (hereafter ‘the VAT Directive’) in respect of Northern Ireland. This derogation would authorise the UK in respect of Northern Ireland to continue to provide a simplification measure that permits businesses to apply a flat rate when accounting for VAT on fuel used when company vehicles are used for private journeys.

2. The UK has operated this simplification since 1986. Council decision 86/356/EC, which was without time limit, permitted a derogation that calculated the flat rate private use charge by reference to the engine capacity and fuel type of the company car.

3. This original derogation was replaced and from 1 April 2007, under Council Decision 2006/659/EC, the UK’s flat rate private use charge has been based on a car’s CO2 emission rating and a time limit was placed on each renewal of the derogation.

4. In 2018, the European Union (EU) through Council Decision 2018/0334 authorised the UK to continue with its long-standing derogation to allow a flat-rate charge to simplify procedures to determine the proportion of VAT relating to the private use of road fuel in company cars. This authorisation ran from 1 January 2019 until 31 December 2020.

Topic  Tax 
Department  HMT 
Council Reference  6145/21 
COM Reference  COM(21)53 
SEC Reference   
PE Cons   
C Reference   

Associated file(s)

  1. 6145/21 - 386 KB - pdf
  2. EM 6145/21 - 113 KB - pdf

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