Can you reclaim VAT on a business car in the UK?

Full answer

VAT reclaim on vehicles depends primarily on whether the vehicle is a 'car' for VAT purposes and whether it is used exclusively for business. Definition of 'car' for VAT: HMRC defines a car as any motor vehicle designed or adapted for carrying passengers, not designed primarily for the carriage of goods. This includes standard passenger cars, MPVs, and SUVs. Vans, pick-up trucks, and lorries are NOT cars for VAT purposes (provided they have a payload of at least one tonne and are not adapted for passenger use). VAT on car purchases: if a car is available for private use at any time (by any person), you cannot reclaim ANY of the VAT. In practice, HMRC treats almost all company cars as available for private use unless the business has strict controls in place (for example, the car is only available during working hours, stored at business premises overnight, and there is a written policy prohibiting private use). 'Available for private use' is interpreted broadly -- even if the employee does not actually use it privately, if they could, the VAT block applies. Exceptions where you CAN reclaim 100% of VAT on a car: taxis and minicabs (used exclusively as taxis); vehicles used only for driving instruction on a fee basis; and stock-in-trade for motor dealers. Leased cars (not purchased, but hired): if a car is used for business with some private use (the normal situation), you can reclaim 50% of the VAT charged on the lease payments. The 50% block covers the private use element. If the car is exclusively business use (no private use whatsoever), 100% is reclaimable -- but this is very difficult to demonstrate to HMRC. Fuel for cars: you can reclaim VAT on fuel, but only the business-use proportion. The easiest method is to pay HMRC the VAT fuel scale charge (a flat-rate surcharge based on CO2 emissions) and then reclaim all VAT on fuel receipts. Vans and commercial vehicles: VAT is fully reclaimable on vans used exclusively for business. If there is some private use of a van, no VAT is reclaimable on the purchase, but VAT on fuel can be apportioned. Accessories and adaptations: VAT on accessories fitted before sale follows the VAT treatment of the vehicle itself. Accessories fitted after (such as roof racks or tow bars) can be reclaimed if wholly for business use. Repairs and maintenance: VAT on repairs and maintenance of a business car (even one with private use) is 100% reclaimable as long as the cost is incurred for the purposes of the business. This is a separate supply from the car itself.

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