Business owners must pay VAT on the private use of cars that form part of their VAT-registered business assets. How is the distance travelled by car for commuting taken into account in this regard?
Payroll and income tax
For the purposes of payroll tax and income tax, the journey between home and work is classified as business use of the car. This refers to the journey from home to the workplace via the most obvious route. Detours to take the children to school or nursery, to do the shopping and so on are regarded as private use.
VAT
For VAT purposes, journeys from home to work are regarded as serving the private needs of the car users. VAT must be paid on this private use.
In many cases, this payment is made on the basis of an authorisation from the State Secretary for Finance. The payment amounts to 2.7% of the car’s list price (1.5% in some situations). However, in cases where the actual private use is known, the VAT adjustment must be based on that figure.
Mobile workers
In a recent ruling The case before the District Court of North Holland centres on the question of whether the journeys made by travelling sales staff between home and work also qualify as private use for VAT purposes. The employer relied on the Fillibeck judgment of the Court of Justice.
This judgement concerns construction workers who have no choice as to where they carry out their work. They may work at a different building site every day. When choosing where to live, they cannot take into account the location where their employer assigns them to work. Consequently, the transport to the building sites arranged by their employer is not regarded as private use.
According to the Court, the situation for sales staff is different. Although they do work at clients’ premises, a significant proportion of their work is also carried out in the office and showroom. Their journeys from home to the office (and back) therefore remain a private matter for the employees. No special circumstances have come to light that would change this.
Proof
As the sales staff do not commute to the office every day, the VAT payable on private use, calculated at 2.7% of the catalogue value, is too high. However, it is up to the business owner to prove the correct amount of VAT payable.
Statistical data may be used for this purpose. However, this is only permitted if such data is sufficiently comparable to the situation for which evidence is to be provided. The burden of proof in this regard also rests with the business operator.