VED, VAT, and lease company

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I have a lease car, there is a clause where they can charge me for any increase in VED over the term.

It looks like it's gone up by a fiver, so they've sent me an invoice.

However it's for £5+VAT, so £6 total.

I can probably scrape together the extra £1 but I'm curious, as VED is not subject to VAT, should they be charging it? Do they HAVE to charge it as they're VAT registered? Could they choose not to charge it if they wanted to?

I guess the main question is how does VAT work when passing on costs for items without VAT?

Thanks

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Butter Face said:

I presume that they are not actually charging you directly the £5 increase, but are instead increasing the rental by £5(+VAT) pa. seems logical, stupid but logical.

That would make sense if it said something like "additional annual rental charge due to increase in Road Fund Licence" but the invoice very clearly says "Road Fund Licence" and mentions an increase from £140 to £145.


I'd never considered the MOT thing, that must be quite common as loads of places outsource them.