VAT ON VEHICLES & FUEL COSTS

VAT registered companies can claim the VAT back on certain fuel costs and vehicle cost. Here is an outline of what you can and cannot claim.

• When buying a new car you may be able to reclaim all the VAT on a new car if you use it for the sole purpose of business. The car must not be available for ‘private use’, and you must have proof that it isn’t – for example it is specified in your employees contract. ‘Private use’ includes travelling between home and work unless it is a temporary place of work.  You may also be able to claim all the VAT on a new car if it is mainly used: as a taxi, for driving instruction, for self-drive hire.
• If you hire a car to replace a company car that is off of the road, you can usually claim 50% of the VAT if all the following apply:
  • You hire it for no more than 10 days
  • It is used only for business
  • Not available for private use
• If you lease a car you can usually claim 50% of the VAT. You may be able to reclaim all the VAT if the car is used only for business and is not available for private use or is mainly used as a taxi or for driving instruction.
• In most cases you can reclaim the VAT for buying a commercial vehicle (van, lorry or tractor) if you use it for business:
  • Motorcycles
  • Motor home and motor caravans
  • Vans with rear seats (Combi vans)
  • Car- derived vans
• If you don’t pay a fixed rate of VAT under the flat rate scheme you can reclaim all the VAT on fuel if your vehicle is used only for business. There are 3 ways of handing VAT if you use the vehicle for business and personal use.
  • Only reclaim the VAT on fuel for business trips and keep a record of the mileage.
  • Choose not reclaim any VAT- if your business mileage is so low that the fuel scale charge would be higher than the VAT you can reclaim.
  • Reclaim all the VAT and pay the right fuel scale charge for your vehicle according to your vehicle’s CO2 emissions by following this link: https://www.gov.uk/fuel-scale-charge
• If you choose not to reclaim VAT on fuel for one vehicle you can’t reclaim VAT on any fuel for vehicles used by your business.
• You can usually reclaim the VAT for all business related running and maintenance costs for example repairs or off street parking or any accessories you’ve fitted for business use. You can claim these additional costs even if you can’t reclaim VAT on the vehicle itself.
• In the case of used vehicles you can only reclaim the VAT on the purchase of these if the VAT is detailed on your purchase invoice or receipt.