November 8, 2016

Vehicles and VAT



VAT Registered Businesses are not usually permitted to reclaim the VAT when they purchase a car, however they can reclaim the VAT if:

– The car will be used exclusively for business purposes and is not available for any private use by employees and/or family.

– The business is a Taxi business, a driving school or provides self-drive hire cars.

– The business is a car dealer, and the car will be part of its stock that it intends to sell within the next 12 months.


Businesses can reclaim the VAT charged on vehicle repairs and maintenance as long as:

– The business pays for the work.

– There is some business use of the vehicle.

However, businesses can reclaim VAT when they purchase commercial vehicles, such as vans.


Car and van sales

If a VAT registered business wasn’t able to reclaim the VAT on the original purchase price of a vehicle which was bought new, it won’t have to charge VAT when it’s sold. If a business was able to reclaim the VAT when the vehicle was bought, it will have to charge VAT on the full selling price of the vehicle, and issue a VAT Invoice to a VAT registered buyer, if requested.

If a VAT registered business buys or sells second hand vehicles it may choose to use a VAT Margin Scheme. This scheme accounts for the VAT on the difference between the price paid for the vehicle, and the price for which it is sold, i.e. the VAT charged on the profit or ‘margin’


If you would like to discuss VAT charged on the purchase and/or sale of business vehicles, please contact us and we will be very pleased to help.

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