When you can claim back VAT on purchase of a car

There are complex VAT rules that determine the amount of VAT that can be recovered when purchasing a new car. The usual rule is that when you purchase a car for your business then no VAT can be reclaimed.

The main exception to this rule is when the new car is used solely for business use. This rule has been the subject of much case law over the years, but it has generally been established that to qualify for VAT recovery the car must not be available for any private use and you must be able to demonstrate that this is so. Accordingly, a car should only be available to staff during working hours and should never be used for personal journeys.

It is also possible to claim back the VAT on a new car that is purchased for a specific business related activity such as: use as a taxi, self-drive hire car or a car for driving instruction.

If your business leases a car for business purposes, you can normally reclaim 50% of the VAT paid on the lease rentals. If the leased car is used exclusively for business purposes, 100% of the VAT can be reclaimed.

The rules are less complicated when you purchase a commercial vehicle such as a van, lorry or tractor that is only used for business purposes. In these cases, all the VAT charged on purchase can be reclaimed. The VAT incurred on the purchase of motorcycles, motor-homes and motor caravans, vans with rear seats (combi-vans) and car-derived vans can also be recovered if they are used solely for business purposes.

Posted in Value Added Tax

Exeter Accountant MJ Smith & Co

Celebrating 25 years of excellence.

Free 1st Meeting
Fixed Fees
Free Support!

Find out more

Client Portal Login: Onvio

Forgot Password?

Latest News

New guidance on sexual harassment and harassment at work

The Equality and Human Rights Commission (EHRC) has published new technical guidance on sexual harassment and harassment at work. It …
Read More

New taskforce to target waste criminals

A new taskforce has been launched to tackle serious and organised waste crime, such as dumping hazardous materials on private …
Read More

Scottish 2020 Budget

Derek Mackay, Scotland’s finance secretary has announced that the Scottish Government’s Budget will be published for 2020-21 on 6 February …
Read More

Twitter Feed