Conversion of Land Rovers from commercial vehicles

The taxpayer’s main activity was buying and selling trailers. In August 2021 it purchased two Land Rover Discovery vehicles and claimed input tax on its VAT return on the basis that they were commercial vehicles used for business purposes.

On reviewing the claim HMRC established that the taxpayer had inserted three fold-up seats with seat belts behind the passenger and driver seats and had also cleared the side and back windows. The conversion took place within three days of the purchase date the intention being that they could be used to transport more passengers/staff to trade shows. A specialist company carried out the installation and it advised the taxpayer that the seats were ‘not permanent’ and therefore their addition did ‘not affect the status of the vehicles for tax purposes’.

HMRC disagreed and disallowed the input tax claim. But it later reversed this decision to charge output tax...