Claiming back VAT on a vehicle purchase

Generally speaking, the purchase of any vehicle where there is any element of private use means any reclaim of VAT may be restricted. HMRC’s website offers the following guidance:

·         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 isn’t, e.g. it’s specified in your employee’s contract.

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

Due to the private use restriction, it is usual that no VAT can be recovered on the purchase of a car. However, you may 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

If you are buying a commercial vehicle, you can usually reclaim the VAT. For example, a van, lorry or tractor. You can only reclaim the VAT if you use the vehicle in a 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

If you are in any doubt that a proposed vehicle purchase is eligible for a VAT reclaim please contact us for advice. Reclaiming the VAT when a claim is in doubt will only attract the attention of HMRC.

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