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Q: My client has a business which hires cars to consumers for periods of up to 30 days for use wholly within the UK. They have a set charge per day on which they apply VAT at the standard rate. On their menu of items, customers can also pay an additional amount per day for the hire of children’s car seats if they wish. What is the VAT liability of this extra charge?

A. The short-term hire of a car in the UK attracts UK VAT at the standard rate (currently 20%) whereas the hire of children’s car seats attracts the reduced rate (currently 5% and as per chapter 5 of Notice 701/23). When they are supplied together, consideration of whether this is a single (standard-rated) or mixed (part reduced, part standard rated) supply is relevant as per chapter 8 of Notice 700. As the car seat is individually itemised and priced, and is optional, it would be a mixed supply as confirmed in the FTT case of Europcar Group Ltd (2020). The client would need to account for standard rate VAT on the price for the car hire and reduced rate VAT on the additional fee for the car seat.

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