This is common question asked by our clients – both running limited companies and self-employed.
Reclaiming VAT on vehicles can cause some confusions so it is important to know the rules.
RECLAIMING VAT ON VEHICLES
You can reclaim all the VAT on new car purchased, however you have to ensure that this vehicle will be used for business purposes only. The car can not be available for private use which even includes traveling between home and work, unless it’s a temporary place of work.
So the vat can be fully reclaimed in the following circumstances:
- On a new car if it’s used as a taxi, driving instruction or self-hire.
- For buying a commercial vehicle like van, lorry or tractor.
In practice, If you lease or hire a private car that is being used as a mix business and private or as a benefit in kind for an employee, you can only claim 50% of the VAT.
Good news is that, VAT can be reclaimed on additional cost associated with running and maintenance of vehicle such as repairs, servicing and parking.
VAT ON FUEL COSTS
You can reclaim VAT on fuel in few different ways. If your vehicle is used only for business purpose you can reclaim full amount.
However, in case of using car for both business and private purposes there are different rules. You can either:
- Reclaim all VAT and pay the right fuel scale charge
- Keep detailed mileage records and reclaim VAT on business trips
- Not to reclaim VAT at all
Claiming the VAT on vehicles and fuel used by you and your employees can be helpful for your company as it can save money. However, you must ensure to do this in the right way to avoid any penalties.
If you have any questions about what was discussed in this post then please feel free to contact us.