Reclaiming VAT on a car purchase...your experiences please

[turboman786]

As above really....

I am wanting to purchase a new car...and my accountant has suggested that we claim the vat back

Im aware that the car can only be used for business use and not for any personal use

Now Im sure i can fit into this category but does anyone have experiences of being challenged to prove the fulfilment of these conditions by HMRC?

[grumpyscot]

Only that my BiL did that - and on the day (would you believe it?) the HMRC inspector came in to do a spot check, who should park the car behind him? My sister. Who wasn't an employee. BiL had to pay the VAT.

[Julian Thompson]

if the vehicle is kept at your home address and is taxed and insured you will have a difficult time convincing HMRC that it is not “available for private use”, which seems to be the test applied.

[Eric Mc]

Reclaiming VAT on a motor car is extremely difficult - and in most cases will not be allowed by HMRC UNLESS some very strict criteria are met. Don't forget, if you are successful in reclaiming Input VAT on the purchase price of the car, you must remember to charge Output VAT on it when it is disposed of (whether through sale or trade-in).

[springfan62]

We did it on a genuine pool car, any trips home were incidental to business use.

Doing it on a car for one "Director" to use would almost certainly be challenged.

You might be ok with a VW Transporter though.

[Zetec-S]

I'd agree with the above. Make sure your books are squeaky clean if you go down this route, you'll be opening yourself up to a lot of scrutiny.

[trickywoo]

Just to add to the above if your accountant really suggested that I would be looking carefully at the other services he provides.

I have no experience of cars but motorbikes are much easier to put through the business generally but I still know of people who have had a visit from the VAT man and sensibly they had two bikes one business and the other personal, which covers your back.

[Eric Mc]

springfan62 said:

We did it on a genuine pool car, any trips home were incidental to business use.

Doing it on a car for one "Director" to use would almost certainly be challenged.

You might be ok with a VW Transporter though.

Can you point me in the direction of the VAT legislation that allows the recovery of Input VAT on motor cars where there is "incidental" non business use please?

[Somebody]

Eric Mc said:

Can you point me in the direction of the VAT legislation that allows the recovery of Input VAT on motor cars where there is "incidental" non business use please?

https://www.gov.uk/reclaim-vat/cars

[Zetec-S]

Somebody said:

Eric Mc said:

Can you point me in the direction of the VAT legislation that allows the recovery of Input VAT on motor cars where there is "incidental" non business use please?

https://www.gov.uk/reclaim-vat/cars

That doesn't say you can use it for incidental non business use:

gov.uk said:

The car must not be available for private use, and you must be able to show that it is not, for example it’s specified in your employee’s contract.

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

[MOBB]

I thought the only way you can claim input vat on cars is if it’s a taxi, driving instructor etc?

[Eric Mc]

MOBB said:

I thought the only way you can claim input vat on cars is if it’s a taxi, driving instructor etc?

Not specifically. If the business needs a car to carry out its primary function, such as a car hire firm, a taxi service or a driving school then yes, Input VAT on any cars purchased specifically for those activities can be reclaimed. Doubly so if the car has been modified to suit its business use - such as a second set of pedals being fitted to a school car.

Ordinary businesses do not absolutely NEED cars to be able to function. However, they may do to AID business - such as an estate agency buying cars for staff to enable them to get to properties when showing around prospective buyers .

If that is the case, any car purchased must be explicitly and clearly used for the business purpose for which they were purchased. They cannot have ANY personal use attached to them and must be kept overnight at the business premises. If the business premises also happens to be the home of (say) a director, then HMRC will most likely NOT allow Input VAT recovery.

[2 sMoKiN bArReLs]

turboman786 said:

As above really....

I am wanting to purchase a new car...and my accountant has suggested that we claim the vat back

With his/her suggestion did they explain what you'd need to do going forward to keep it legit?

[Julian Thompson]

trickywoo said:

Just to add to the above if your accountant really suggested that I would be looking carefully at the other services he provides.

I have no experience of cars but motorbikes are much easier to put through the business generally but I still know of people who have had a visit from the VAT man and sensibly they had two bikes one business and the other personal, which covers your back.

I don’t see how that covers anything, given that the personal bike is outside the scope of the VAT inspection...

[2 sMoKiN bArReLs]

Get a Ford Ranger with a 1 tonne payload, then the doubt evaporates (for the moment).

[trickywoo]

Julian Thompson said:

trickywoo said:

Just to add to the above if your accountant really suggested that I would be looking carefully at the other services he provides.

I have no experience of cars but motorbikes are much easier to put through the business generally but I still know of people who have had a visit from the VAT man and sensibly they had two bikes one business and the other personal, which covers your back.

I don’t see how that covers anything, given that the personal bike is outside the scope of the VAT inspection...

I was thinking from the point of view of being kept at home when business and home are the same address. If you have a business bike only in your garage its going to have potentially more scrutiny as to its use than if you have a private bike in the garage also.

Even with bikes for 100% reclaim and no BIK it can't have personal use. I know quite a few home based directors with bikes on the company. Personally I'm not comfortable with it as nearly everyone in that situation is going to use it personally. Having a second bike makes it harder for the VAT man to make anything stick.

[jamoor]

If you lease it you can claim 50% of the VAT back on the payments. You can also pay a balloon at the end to keep the car.

So for around 50% of the purchase cost you may be able to get some sort of VAT refund if going down the lease route.

[anonymous-user]

Some discussion about it here, with a look at four cases that made it to the first tier tribunal stage

https://www.taxadvisermagazine.com/article/motor-c...

If you want to see the hmrc manual on the topic

https://www.gov.uk/hmrc-internal-manuals/vat-input...

[springfan62]

Eric Mc said:

Can you point me in the direction of the VAT legislation that allows the recovery of Input VAT on motor cars where there is "incidental" non business use please?

Incidental use would be where for example an employee takes the pool car home in order to leave early the next morning on a business trip. My understanding this is not treated as private use.

[Eric Mc]

I would say that HMRC would definitely challenge that.