Taking Account

Subscribe to our monthly e-newsletter.

  • Taking Account

VAT and Motoring Costs

September 2010

Buying a car - Unless you are a motor trader or in business leasing cars you will find it difficult to reclaim VAT paid on a purchase of a car, even if there is no private use of the vehicle. To reclaim VAT you will need to demonstrate that there is no possibility of private use - very difficult to prove.

Buying a van - As long as you can produce a proper VAT invoice to evidence the purchase you should be able to recover any VAT charged when you buy a van or other commercial vehicle. If there is any private use of the vehicle you will need to restrict your VAT recovery by the private use proportion.

Leased cars - If there is any private use of the leased vehicle only 50% of the VAT charged on the lease rentals can be recovered.

Insurance and MOT costs - No vat is added to these costs so none can be recovered.

Repairs - VAT charged on all repairs is recoverable in full even if there is an element of private use of the vehicle.

Fuel - Where the business provides fuel for both personal and business use, the VAT recovery method used should ensure that no input tax is recovered in respect of private use.

Mileage charges - Where employee use their own vehicles for private motoring and are paid a mileage charge for business journeys, VAT is recoverable on the fuel element of the mileage payments but not on any other aspect of the payments.

Hilton Sharp & Clarke