Can you claim back the VAT when you buy a car?

Euan

September 24, 2019

The short answer to this question is a resounding “no”, but as always with tax, there are exceptions.

Obviously, if you are in business and not VAT registered, you cannot reclaim the VAT added to any of your purchases. If you are VAT registered HMRC has published the following guidance for VAT recovery when acquiring or leasing a company vehicle:

Buying a new car

You may be able to reclaim all the VAT on a new car if you use it only for business. The car must not be available for private use, and you must be able to show that it is not, for example it’s specified in your employee’s contract.

‘Private use’ includes travelling between home and work, unless it’s a temporary place of work.

You may also be able to claim all the VAT on a new car if it’s mainly used:

as a taxi
for driving instruction
for self-drive hire

Leasing a car

If you lease a car, you can usually claim 50% of the VAT. You may be able to reclaim all the VAT if the car is used only for business and is not available for private use, or is mainly used:

as a taxi
for driving instruction

Self-drive hire cars

If you hire a car to replace a company car that’s off the road, you can usually claim 50% of the VAT on the hire charge. If you hire a car for another reason (for example you do not have a company car), you can reclaim all the VAT if all the following apply:

you hire it for no more than 10 days
it’s used only for business
it’s not available for private use

Commercial vehicles

You can usually reclaim the VAT for buying a commercial vehicle (like a van, lorry or tractor) if you only use it for business. If they’re used only for business, you can also reclaim VAT on:

motorcycles
motorhomes and motor caravans
vans with rear seats (combi vans)
car-derived vans

A further restriction in your ability to recover the VAT on a vehicle purchase applies if you purchase a second-hand car and the dealer selling the car uses the VAT margin Scheme. The invoice for the car purchase will clearly show when this is the case. To recover VAT, it must be shown on the seller’s invoice.

Source: DocSafe