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:
- 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.