FLEET operators could save millions of pounds following an historic tax victory by accountants over HM Customs & Excise. Tax specialist Ernst and Young successfully challenged Customs' stance on the deductibility of VAT on the delivery of company cars - paving the way for recovery of VAT potentially back as far as 1978.

The ruling, by a VAT tribunal, comes as three companies again prepare to challenge the wider issue of VAT recovery on cars bought for business use. Royscot Trust, Allied Domecq and dealer group TC Harrison this week continue their lengthy battle to establish VAT deductibility on all cars purchased for business use in an appeal hearing at the High Court (Fleet News, July 21).

Ernst and Young tax experts contested the case on behalf of BT, which buys around 2,000 cars a year direct from manufacturers and negotiates its own delivery charges. Tax experts say the VAT victory only applies to fleets which buy direct from manufacturers and does not apply to fleets which take delivery of vehicles via dealers.

Head of Ernst and Young's VAT litigation group Dario Garcia argued that delivery charges were wholly distinct from the supply of cars themselves and therefore not subject to Customs' blocking order preventing recovery. The case arose because the Government never drew up national legislation to implement the European Sixth Directive - which provides for VAT recovery - as far as incidental transport services are concerned.