36 replies to this topic

[Leigh Trevail]

Sometime in the 1950’s the Treasury lifted the burden of Purchase Tax from the builders of Homemade Specials, the argument was that the special would have been constructed with many used parts, which the tax had already been paid on first time around. Presumably tax was paid on any new pieces purchased for the project. This helped to kick off the plethora of kit cars in the 50’s, would any of the TFN regulars know the date when this happened.

[Allan Lupton]

I can't answer your question directly, but as far as I remember a kit car made from new components did not attract tax so long as they were not all supplied by the same company.
In 1966 a friend bought a Lotus Elan as a self-assembly kit, most being supplied by Lotus Components (I think it was called) of Cheshunt and a significant bit (engine probably) by another company. It all came on the same lorry.
To comply with the Rules there could be no assembly manual but the Workshop manual included a section on rebuilding after a major accident (or similar title) . . . . Our team of constructors found it quite helpful.
After a year or so the Lotus was written off and its replacement was built for the owner by someone unknown (but suspected of working on the Hethel premises) for a consideration. Don't ask.

[ensign14]

Paging Dr Mike...he wrote a bit for Vintage Racecar talking about how Lotus would supply kit cars in a suspiciously well-assembled state at kit car taxation or something like that.

[Ray Bell]

Wasn't it merely the industry taking advantage of lower taxes on parts rather than cars?

So people could buy a partly assembled kit that needed further assembly and the addition of engine, gearbox and rear axle, for instance? And that would attract a much lower tax than a complete car because it clearly wasn't a car?

[kayemod]

Originally posted by ensign14
Paging Dr Mike...he wrote a bit for Vintage Racecar talking about how Lotus would supply kit cars in a suspiciously well-assembled state at kit car taxation or something like that.

This 'no tax on kit cars' thing applied when I was at Lotus in Norfolk. More than half of the output (I think) were supplied as 'kits', but several of my work colleagues had lucrative sidelines assembling these for customers. Sales put kit buyers in contact with one of these factory-based assemblers, the best of whom had quite lengthy waiting lists. And when they'd done their assembling, the cars would be run through the factory service department for a good once over, so this method of tax avoidance was on quite a large scale. I could be wrong, it's a long time ago, but weren't Lotus Components only concerned with the customer racing side, and never had much to do with road cars?

[Allan Lupton]

Originally posted by kayemod


This 'no tax on kit cars' thing applied when I was at Lotus in Norfolk. More than half of the output (I think) were supplied as 'kits', but several of my work colleagues had lucrative sidelines assembling these for customers. Sales put kit buyers in contact with one of these factory-based assemblers, the best of whom had quite lengthy waiting lists. And when they'd done their assembling, the cars would be run through the factory service department for a good once over, so this method of tax avoidance was on quite a large scale. I could be wrong, it's a long time ago, but weren't Lotus Components only concerned with the customer racing side, and never had much to do with road cars?

I could well have been wrong about Lotus Components, as it wasn't my car. Certainly the car and engine were from different suppliers (but on the same lorry).
What you say about the assemblers ties in with my memory of the second car and yes the trip through the service department was mentioned now you remind me. I have a feeling that the first car was entitled to a free service as Cheshunt after we assembled it.
I think it really was tax evasion dressed up to look like avoidance.;)

[ian senior]

I'm no expert on this, but I think Lotus Components looked after Lotus 7 sales/production towards the end of Lotus-built 7 production, and probably for a few years before that. The series IV 7, that unloved specimen, certainly mentioned Lotus Components in the adverts. Elans, even in kit form, were I think still the province of the main Lotus outfit.

I'm not sure if the purchase tax thing was the sole reason behind the rash of Ford and Austin 7 based specials in the early 50s. The developments in glass fibre technology probably had a lot to do with it, and the availability of cheap bodies that you could plonk on top of your Ford Pop or Austin 7 chassis. Some of the bodies were ghastly, some quite decent, but even so lots of the resulting cars were something of a pig's ear.

[2F-001]

When I built my Caterham (the recognized continuation of the Lotus 7, for those not familiar with them), in 1990, things had moved on little bit since we were then into the era of VAT.
There was still a 'Special Car Tax' though - the 'special' referring to the tax rather than the nature of the vehicle: it was, I understood, a extra tax applied to cars supplied and bought in the normal way, in addition to any other taxes or charges.

As I built my car entirely from brand new components, I had the option of coughing up that tax (I forget how much, but it was considerable) upon providing receipts and a Certificate of Newness. I thus received a current, age-related registration number rather than be registered with a Q-plate - the catch-all for home-builds, kit-cars, recycled machinery, personal imports or whatever other odd-balls that didn't fir with the usual dealer-oriented cars.
Q-plates still had a little bit of a stigma among some folk, and being (relatively) young and impressionable I stumped up the cash and got a regular number. With hindsight I'm not so sure why I bothered; I've certainly never had any notion of selling the car, so resale value doesn't come into it. I think that particular tax was scrapped, or restructured very soon after that anyway.

[Paul Rochdale]

There were many reasons for the demise during the 1960s of kit car manufacturers such as Rochdale Motor Panels - the advent of the Mini in 1959 for £499, the aggrevation of suppliers of engines, axles and electrical components became unreliable as a result of frequent industrial action, and lastly the re-instatement of purchase tax which had not been applied to earlier cars. It was no longer attractive to build a kit car for say £900 with all of the hassles when a complete car could be bought off the production line for less.

[Leigh Trevail]

In reply to Paul Rochdale .... You mentioned the re-instatement of Purchase Tax, by that did you mean VAT. Also if the re-instatement helped with the demise of the Rochdale business surely it stands to reason that the abolishment of Purchase Tax in the first place helped to kickstart the Special & Kit industry, which is what I said at the start of the thread. One of the reasons people were building Specials in say 1950 was because of the shortage of cars which kept the prices high. Most of these would have been bodied in ally, plywood or both, fibre glass bodies off the shelf came later.

Also would you please be so kind as to clarify your conection with the Rochdale Company..

[NRoshier]

The purchase tax at the time was not the trifling amount that afflicts the UK now. The purchase tax at the time was 30% for cars under 1000UKP and 66.66% for cars selling for more than that. With Britain joining the EEC in 1970 VAT was introduced and was applied to 'kit' cars and the upper rate of purchase tax was reduced from 50% to 17.5%. However I believe you are correct that without the concession/oversight then the specials may have been stillborn.

[GeoffE]

In 1956, the rate of Purchase tax appears to have been about 50%, irrespective of price

Rolls Royce Siver Cloud ... £3385 + 1694

Jaguar 2.4 ... £1021 + 512

Ford Consul ... £520 + 261

Citroen 2 CV ... £398 + 200


By 1964 it was about 21%

Chevrolet Sting Ray ... £2840 + 592

Jeep Wagoneer ... £1650 + 344

Austin Healey 3000 ... £915 + 191

Fiat 500 ... £330 + 69

[NRoshier]

I believe that the 30% and 66.66% purchase tax was in 1947 prior to the changes that allowed the specials boom.

[Leigh Trevail]

NRoshier was correct when he said that Purchace Tax was at 66% for cars over £1000, although this did not last that long. The Duncan company of North Walsham in Norfolk produced the Drone, this was a basic body on a Healey chassis, this was sold for less than £1000 so was at the 33% rate. It could then be rebodied with a more suitable body later, without incuring anymore tax. Wooden bodied Shooting Brakes such as the Lea Francis were classed as a commercial, so avoided the tax. Likewise small vans could be purchased tax free and the owners would have the windows put into them later.

Other contributors have mentioned the length that Colin Chapman would go to to avoid his customers paying the tax, so the savings must have been worth while!

But this does not answer my original question, when were home made specials first exempt from paying Purchase Tax??

[Allan Lupton]

Rusty memory says the rates were 30% and 60%, but when you look at the adverts around 1950-1 it's a bit less. I suppose that some items in the base price were excluded from the PT calculation.

The proliferation of bodies for specials had nothing to do with taxation, but were a product of the post-war shortages. Many people fancied modernising their agéd Austin Sevens and Ford Tens which they did either on their own or with the commercially available bodies. You had to pay PT on the new bodies as PT was levied (at source) on new items

Kit cars were an extension of that, where more of the car was new and people like Jack Turner used current running gear and powertrain in a chassis and body of their own design and manufacture.

As has been covered above, quite good cars were eventually offered as "kit" cars until the advent of VAT in 1971. Thereafter the savings were not great, as the 10% VAT was levied on everything, but a Special Car Tax was introduced on complete cars (to make up the taxation shortfall, one assumes). That would not have applied to parts, so could have been saved.
The Special Car Tax was calculated on the value of the car as presented, so included any optional extras that were fitted. Smart people bought some of the optional extras as spares later, thus avoiding Car Tax on them.
I think the SCT must have disappeared, but with VAT at 17½%

[Allan Lupton]

Originally posted by Leigh Trevail Wooden bodied Shooting Brakes such as the Lea Francis were classed as a commercial, so avoided the tax. Likewise small vans could be purchased tax free and the owners would have the windows put into them later.
[/B]

Lea-Francis made the shooting brakes with plywood rear side windows as vans to avoid PT as you say. There was something like a two-year period before you could put glass in without paying PT.
The normal shooting brakes with glass side windows were cars and paid PT

[Leigh Trevail]

To Alan Lupton ..... I stand corrected on the Lea Francis.

What started me off on this was the fact that I know a chap called Bryan who as a 16 year old built his own car, this was in Glasgow probably in 1951 / 52. The car consisted of various bits of pre-war cars, on which he built his own body. As most of the components were second hand the tax had already been paid on them, presumably he paid tax on any new parts and materials as he purchased them. As he did not start with a single donor car with a registration number he had to register the car himself, with this he was told that he would have to pay tax on it.

His neighbour was the M.P. Cyril Bence who took it upon himself to mention this anomaly in the House Of Commons, and subsequently the law was changed. I understand that this alone did not create the kit car industry but it must of helped, this is proven by the fact that Colin Chapman went to such lengths to get around the legislation to keep his cars tax free.

It is not often a government has done something positive for motor sport, but why can I not find the relevant dates!

[Sharman]

To continue the theme of government departments tax and VAT. We are in the midst of a wrangle with Customs and Revenue. We have repatriated from outside the EC, a 1959 Mk 1 Grantura only 26 of which are known to exist in the world and just 5/6 in the UK all but 2 non running. We applied for, under the Binding Tariif Agreement which is designed to harmonise imports throughout the EC, the lower rate 0f VAT on the grounds of its rarity and were supported by the TVR Car Club. This car is full race and by no stretch of the imagination is it going to return to road use.
Customs say

a) It is not rare
b) It is not innovative
c) It did not belong to somebody famous or take part in a famous race
d) It is not VALUABLE enough.

We have appealed the decision and been refused again. There is yet another appeal to be made. If that fails I'm on to my MP whom I know socially and stir it that way.
But what constitutes RARE and do only very expensive items warrant the term "collectable"?
I urged my son to bring the car in thro' France where I live. There is a list (not definitive) covering what is acceptable (anybody wanting a copy I can email) but this was not done as we knew of the BTA and assumed that the UK would honour its terms. Even though the TVR is not shown on the list the French Customs said "Bien sur elle est une voiture de collection . La limite basse sera impose"

There are fools and bloody fools but the decision makers in Customs and Revenue must rank as the most dull witted pillocks in the Civil Service. And that says something.

[Leigh Trevail]

To Sharman .. Your last paragraph is quite topical, and whilst time and money is being wasted all sorts of illegal stuff is being smuggled through customs. I sympathise with your plight but this is getting us off thread. If any one else has similar problems as Sharman please could they start a new thread, If this sounds bitchy I appogise but we could go on about this kind of thing forever.

Best of luck with the TVR!

[D-Type]

Originally posted by Sharman
~There are fools and bloody fools but the decision makers in Customs and Revenue must rank as the most dull witted pillocks in the Civil Service. And that says something.

Except possibly the one who put two discs of highly confidental and marketable personal information in the internal mail! But that wasn't decision making so probably you're right.

[Sharman]

With the greatest respect to Mr Trevail the wheel is going full circle because when I bought my TVR back in 1959 I bought it as a kit and did not pay PT. There is a twist however, in the papers which came with this present car, there is reference to the Registration Mark of my car TDL 933. That number is not shown as being in existence. This present car has an age related number issued in 1993. The chassis number of this car relates to another Reg No which still appears on the DVLA data base. Hence we could be talking about a car on which I did not pay purchase tax, so I am not off thread.

[Paul Rochdale]

Leigh

I have no connection with Rochdale Motor Panels which ceased to exist many years ago but I and Neil Roshier have been members of thr Rochdale Owners Club for many years.

[Leigh Trevail]

To Sharman To be honest I thought this thread would die a sudden death like all my others. It has has a good responce with lots of interesting comments, but I am still no nearer to finding the date the tax law was changed. I could see that the thread was in danger of changing course and becoming a vehicle to slag of the Government and its various departments, as they persist in giving us reason to do so. I did not want that to happen, and I am sure you can see my point.

To my reckoning your TVR was registered in the Isle of Wight during Jan 1960. Another link here, all this is research for my book on Fersfield, at the second meeting in June 1951 Bill Last raced his Buckler there. He was later a TVR dealer in Ipswich and founded the Trident Car Company, which was similar to a TVR.

To Paul Rochdale Thanks for clarifying that, I've always liked the Rochdale.

[Sharman]

You are quite right about where it was registered because I was working down there, I built the car in a garage the name of which I have now forgotten & put a full race Downton unit in it. The car, disappeared after I part-exed it against a Sprite then showed up again n "TVR Success against the Odds" by Peter Filby.As Paul knows I also had a Rochdale GT and actually drove a very early TVR with a Rochdale "C" Type body fitted.

[Leigh Trevail]

It is all very complicated, I wish you well!

[mariner]

Two things to add if I may.

With respect to the import problem on the TVR have you contacted the British Historic Vehicle Clubs group? They are the umbrella organisation for all UK historic vehicle clubs and they have both an intimate knowledge of many car related legal topics and are active in keeping in contact with government departments. By working with those departments they have acheived a lot.

Without wanting to risk any libel actions I seem to recall that many books from the insiders at the "old" (ie. Chapman) Lotus reported strange goings on with VAT so the same was probably true of purchase tax!

[Ray Bell]

Leigh, I speculated earlier that this was all a matter of the industry using a provision of the law to their advantage...

I suspect you are chasing a straw here in your method of questioning. Could it not be that we are talking about different taxes? Or at least different provisions relating to the one tax?

Purchase Tax rates being levied at very different rates for whole cars and for kits of parts is understandable. It probably existed in law and then was used by Chapman and others to make their product more saleable.

But the 'Specials' part of things, the incident you describe with your friend Bryan, could that not be a separate provision altogether?

I think it does need to be clarified what you are actually looking for.

[Sharman]

Dredging my memory, in the early 50s not only was there purchase tax but a special car tax. I'm away to see family tomorrow but if the thread is still running in a week's time I'll do some research

[Allan Lupton]

Originally posted by Sharman
Dredging my memory, in the early 50s not only was there purchase tax but a special car tax. I'm away to see family tomorrow but if the thread is still running in a week's time I'll do some research

See my post no. 15: SCT was an add-on with VAT (post 1971) to keep the tax content up.

[Leigh Trevail]

I suspect you are chasing a straw here in your method of questioning. Could it not be that we are talking about different taxes? Or at least different provisions relating to the one tax

I had been thinking along those lines myself. I first heard of the 1950’s tax change when I was about 11, that was when V.A.T was introduced, being a pessimistic kid I thought that would be the end of kit cars. However there was definitely a change in the tax law, it is possible that I am not using the correct term for the tax in question. This would explain why my enquiries have never got very far, tax is not the most exciting of topics and I do appreciate all the contributions to the thread!

[Terry Walker]

In the end you might have to ask a lawyer. Not one who charges fees, you understand, but an academic expert on the history of Purchase Tax, who occupies a chair at some handy law school. Mind you, these things can be very arcane. I spent 30 years in Customs, and the various provisions relating to, say, travellers' duty free allowances, were changed by very obscure legal instruments, not directly by the Customs Act or Customs Tariff Act.

I bet it turns out to be done by varying a schedule to the Purchase Tax law, moving the kit cars from one category (50 percent or whatever) to another (exempt). Once you know the method, you can probably discover when because then you'll know here to look. I can tell you though, this sort of stuff is very hard to track down, specially after the legisaltion is obsolete.

Of course it was all a long time ago, and there's a lot of legal eagles who'll say "Purchase Tax???? Purchase Tax??? WTF???"

Happy hunting.

[Leigh Trevail]

Thank you Terry, you are right; it was a long time ago. "Therein lies the problem".

[Vitesse2]

I don't have an exact date, Leigh, but I can say with certainty that it was before December 22nd 1961. On that date The Times published a short article about the new Deep Sanderson type 301, which was available in kit form for £610 or "already assembled ... £951, including Purchase Tax".

So far that's the earliest reference I've found in The Times, but I'll keep looking.;)

[Vitesse2]

Aha! I may have found a clue! It could be that the exemption was already there. In his Budget speech for 1946, Chancellor Dalton said:

.... neither a motor manufacturer who sells a chassis only nor a coach builder who sells a body only is selling a motor-car and the completed car has hitherto escaped tax."

He went on to say that it was his intention to take appropriate steps to close loopholes of this sort. But of course, that's no evidence he ever did!

Source: The Times April 10th 1946.

[GeoffE]

This web page about the cars exhibited at the South Bank Exhibition (1951) suggests the rate of purchase tax at that time was about 28%. Perhaps the later raising of the tax to first 50% then 60% was instrumental in encouraging the marketing of kit cars.

http://www.packer34....carsarticle.htm

[Ray Bell]

Originally posted by Vitesse2
Aha! I may have found a clue! It could be that the exemption was already there. In his Budget speech for 1946, Chancellor Dalton said:

"..... neither a motor manufacturer who sells a chassis only nor a coach builder who sells a body only is selling a motor-car and the completed car has hitherto escaped tax."

He went on to say that it was his intention to take appropriate steps to close loopholes of this sort. But of course, that's no evidence he ever did!

Source: The Times April 10th 1946.

This is what I'm saying... it was a means of escaping the purchase tax that existed all along, it only remained for the small makers to take advantage of it...

One wonders, however, how much the classic coachbuilders depended on that 'loophole' to survive.

And then there's the issue of the tax that we've seen here described as falling due when a car is presented to be registered. If I understand it correctly, at that point there was a tax payable if it had become a new entity. This, however, would seem to work against the kit car business.

[Sharman]

Don't mean to keep dragging things up but have now returned from seeing the family and can get on with more omportant things.
I have mentioned the problems with Revenue and Customs . They continue. I would scan it to the forum but have still not yet learned how , I think however it might be of some interest.



I quote from the letter of refusal to allow our appeal against the imposition of 17.5% VAT on what we are sure is an historic vehicle.

"....they meetthe criteria set out etc ....and therefore
------possess a certain rarity value
------are not usually used for their original purpose
------are the subject of special transactions outside the normal trade in silmilar utility items
------are of high value
------illustrate a significant step in the evolution of human achievements or a period of that evolution

the letter goes on to say
the foregoing can be taken to apply ----if not contradicted by the facts-----

--- vehicles in their original state, without substantiaal changes to the chassis, steering or braking systems, engine etc at least 30 years old and of a model or type which is no longer in production.

He concedes that most of the above applies to a 1959 Mk 1 TVR which follows the FIA Homologation Requirements
he then quotes
"Normally second hand cars fetch a lower price than new cars...If however such an article is bought at several times the price of a new car, that is an indication that the value thereof is not based on ts original intended use but on other criteria. Those criteria must normally be the interests of collectors"

The next bit is the best
" A low value new car would be worth in the region of £7000, higher value cars considerbly more(!!!?). Using 3 as the smallest interpretation of the word 'several' a mnimum high value would be £21000. As you paid less than this it cannot be considered as high value in this context even using the most liberal of interpretations."


So because we thought something was a good buy and undervalued (a MK 11a sold for well over £30000 recently) our appeal was dismissed.

Somethng is not quite right somewhere