Ilyas Patel Accountants in Preston
Ilyas Patel Accountants in Preston
VAT implications on business vehicles can be complex.
This guide breaks down the key points about reclaiming VAT on cars and vans, ensuring your business remains compliant and benefits from potential tax savings.
(Read Time: Approx. 3 minutes)
Businesses can reclaim input VAT on cars if the car is used exclusively for business purposes and is not available for private use.
Because meeting the second condition is challenging, most businesses cannot reclaim VAT on cars.
However, input VAT can be reclaimed for cars used as:
For leased cars, businesses can recover 50% of the input VAT on qualifying car lease payments, regardless of private use.
When selling a car, VAT must be charged if input VAT was reclaimed on acquisition.
Conversely, no VAT is charged if input VAT was not recovered during purchase.
The rules differ for commercial vehicles.
Input VAT on the cost of commercial vehicles used for business purposes can be fully recovered.
VAT must be charged on disposal if input VAT was recovered upon acquisition, even if only partially.
If no VAT was charged on acquisition but the vehicle is sold at a profit, the Margin Scheme should be applied.
For cars, input VAT can be reclaimed on fuel used for business purposes.
If fuel is used for both business and private purposes, businesses can claim full input VAT and apply the VAT fuel scale charge.
Additionally, businesses can claim back input VAT using the VAT fraction applied to the advisory fuel rate if detailed mileage records are maintained.
Certain vehicle costs are not subject to VAT.
Motor insurance is exempt from VAT, so no input VAT is recoverable.
Vehicle Excise Duty is outside the scope of VAT, so again, no input VAT is recoverable
A van for VAT purposes is a vehicle with three or more wheels that is not a car.
A car is any motor vehicle used on public roads with accommodation for passengers and roofed space with side windows behind the driver’s seat.
Commercial vehicles primarily designed for carrying goods and vehicles over three tonnes are not considered cars for VAT purposes.
A van for VAT purposes is a vehicle with three or more wheels that is not a car.
A car is any motor vehicle used on public roads with accommodation for passengers and roofed space with side windows behind the driver’s seat.
Commercial vehicles primarily designed for carrying goods and vehicles over three tonnes are not considered cars for VAT purposes.
Double cab pick-ups and modified vehicles have specific classifications.
For example, if a hardtop is added to a double cab pick-up, its classification may change based on its payload.
HMRC provides detailed guidance on these classifications.
A van for VAT purposes is a vehicle with three or more wheels that is not a car.
A car is any motor vehicle used on public roads with accommodation for passengers and roofed space with side windows behind the driver’s seat.
Commercial vehicles primarily designed for carrying goods and vehicles over three tonnes are not considered cars for VAT purposes.
Vehicles can be converted to qualify as commercial vehicles for VAT purposes, provided the conversion is genuine and not used initially as a car.
Reclaiming input VAT on cars is generally blocked unless the car is used exclusively for business and not available for private use, used for taxi services, self-drive hire, or driving instruction, or is part of the stock of a motor manufacturer or dealer.
For leased cars, only 50% of the input VAT is blocked, and 100% can be reclaimed for business-specific uses like taxis or cars for driving tuition.
Maintenance charges on lease cars are fully recoverable.
Charging electric vehicles at business premises or public places allows businesses to reclaim related costs for business use.
Home charging for employees currently does not qualify for VAT recovery, but HMRC is reviewing this policy.
It’s crucial for businesses to keep detailed records and seek expert advice to understand VAT regulations effectively.
For personalised advice and to ensure your business maximises VAT recovery while remaining compliant, contact Ilyas Patel Accountants today.
Maximise your VAT recovery on business vehicles and avoid costly mistakes.
Contact Ilyas Patel Accountants for expert guidance tailored to your business needs.
Give us a call today at 01772 788200, or on our 24/7 WhatsApp at 07787 010190.
Kind regards,
Ilyas Patel