Claiming back VAT on cars, do you want to get VAT back on your car purchase?

If you buy a car for business purposes, then the VAT is recoverable. But if HMRC thinks that it's not being used exclusively for business purposes, they will block your claim. In this week’s I hate numbers podcast, I am going to explain what exactly is meant by “exclusive use” and how you can prove that your car meets these requirements.

The rules around exclusive use of cars are very complicated and there are lots of grey areas where HMRC could challenge your claims. So in this podcast episode, I'm going to give you some tips on how to make sure that when buying a new or second hand vehicle for work purposes, you don't fall foul of the taxman!

What is the VAT definition of a car?

That may sound a bizarre question, but if a vehicle is not a car, it will normally be a commercial vehicle or a van.  If it's a commercial vehicle or Van reclaiming VAT is easier.

Listen to find out more

Conclusion

Moreover, if interested in Claiming back VAT on cars , this is all explained is here for you.  You will learn how it affects you, avoid confusion and overwhelm.  Many businesses find themselves in the same situation, wanting to know about VAT, more particularly claiming it back.  This podcast will help.

Listen to find out more.

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Getting VAT back on a car purchase has always been a challenge for businesses. HMRC will block the recovery of VAT on your car purchase unless you can show them that the car is being used exclusively for business purposes. In this week's I Hate Numbers Podcast, I'm going to explain what a car is for VAT purposes, what the current rules are on reclaiming VAT on cars,

and what you need to do to be able to reclaim the VAT.

You are listening to the I Hate Numbers Podcast with Mahmood Reza. The I Hate Numbers podcast mission is to help your business survive and thrive by you better understanding and connecting with your numbers. Number love and care is what it's about. Tune in every week. Now, here's your host, Mahmood Reza.

Hi folks. Welcome to another weekly episode of I Hate Numbers. I love numbers, but I get it that many businesses don't have that joy. My mission is to help you get closer to your numbers, to improve your well-being, your bank balance, and give you power and control over your business future. Let's crack on with the podcast.

Firstly, what is the VAT definition of a car? That may sound a bizarre question, but if a vehicle is not a car, it will normally be a commercial vehicle or a van. Reclaiming the VAT will be much easier. Car for VAT purposes is any motor vehicle normally used on public roads and it has more than three wheels, and it's either constructed or adapted mainly for carrying people.

A van on the other hand, is designed to carry goods. The vehicle has roofed accommodation to the rear of the driver's seat, and it's fitted with side windows, or constructed, or adapted for the fitting of side windows. So, windows in a vehicle is key. There are vehicles that are exceptions. So, the vehicle fits within this description,

it is not seen as a car for VAT purposes. A vehicle capable of carrying only one person, or suitable for carrying 12 or more, including the driver, is not seen as a car. So, minibuses and coaches would come within this description. If the vehicle is a caravan, an ambulance, or a prison van, it is not seen as a car for VAT purposes.

If the vehicle has less than three tons unladen weight, it is not seen as a car. If it's a special purpose vehicle such as an ice cream van, a mobile shop, or a hearse, it will not be seen as a car. A vehicle that has a payload of one ton or more will also not be seen as a car, so typically double car pickups will come within that description.

The current rules are, like, to reclaim VAT, the car must be for exclusive business use, and exclusive means just that - 100% business use. Even if one mile of private use is carried out, then you cannot claim the VAT back. Exclusive is 100%, not 99%. If you purchase, import, or acquire a vehicle in the following situation, then you can recover the VAT in full.

If your business is that of a motor manufacturer or a dealer, those cars that you buy for stock will be fully recoverable. They will not be seen as blocked VAT. If the vehicle you are buying is for your taxi business, driving instruction car, or higher business, then VAT is recoverable in full. If the vehicle is going to be used exclusively for the purposes of your business and would not be made available for the private use of anyone, then that is recoverable in full.

In monetary terms, every 1000 pounds spent on a car will have 167 pounds of VAT attached to that. So, for a 24,000 pound car, there's a potential claim of four grands worth of VAT. That's not small change. And lastly, we need to consider what we need to do to be able to evidence and support our claim for VAT recovery. To be able to fully reclaim back the VAT,

we need to demonstrate that the car is not available for private use. There are steps that we can take to make this happen. Have employment contracts with directors and employees that prohibit the private use of company cars, and make sure they're enforced. Get employees to sign a declaration that they agree that no private journeys can ever be undertaken.

Cars are to be kept at the employee's premises with the keys securely stored, for example, in a locked cabinet, or a safe at nighttime. Company policy and employment contracts should be that cars are never to be taken home unless the employee has to be on call, or has an early start. Ensure the vehicle for business use only.

Ensuring the vehicle for business use only is a strong indicator of intention for exclusive business use. If you are a sole trader, you cannot have a legally enforceable agreement with yourself, but there are steps that you can take, such as getting an insurance policy, which is for business use only. Minute these things at a board meeting,

produce resolutions, even if you are a one-person director shareholder company, still go through doing the paperwork and the process. Maintain a mileage lock, and evidence the fact that the mileage undertaken is not for personal use. So, let's summarise folks what we've got. We've got the idea of what a car is for VAT purposes.

We've got the idea that it's got to be for exclusive business use to be able to fully reclaim the VAT, and we've got the processes and procedures that we can go through to support our claim. In that case, there should be no restriction on claiming back the VAT on your car. Folks, I hope you found this useful.

Remember to subscribe, feedback, provide comments on the podcast, and until next week, have a good week. We hope you enjoyed this episode and appreciate you taking the time to listen to the show. We hope you got some value. If you did, then we'd love it if you shared the episode. We look forward to you joining us next week for another I Hate Numbers episode.