One of our most commonly asked queries is about VAT on cars. If I had £1 for every time I’d been asked, I could nearly afford last weekend’s flight to Madrid.
If you buy a new car within the company you can’t reclaim VAT. The exception is only if it is used 100% for business purposes. The car must not be available for private use and this must be stated in your employment contract. Remember travelling from home to your normal place of work is classed as private use. Therefore, it is rare to reclaim the VAT.
However, you can reclaim the VAT if your business is:
• A taxi driver
• A driving instructor
• Self-drive hire
If you are thinking of leasing a car you can usually reclaim 50% of the VAT or 100% if the car is used purely for business purposes and not available for private use.
If you hire a car you can reclaim all the VAT as long as you hire it for less than 10 days, its used only for business and not available for private use.
You can also reclaim VAT on business related maintenance or accessories added to the car.
For business cars you can either reclaim the VAT on fuel for business trips and keep a detailed mileage record or reclaim all the VAT and pay the right fuel scale charge for your vehicle.
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