UK car purchases: What you need to know about recovering VAT

The main exception to claiming VAT on UK car purchases is if the new car is used solely for business use. To qualify for VAT recovery the car must not be available for any private use and you must be able to demonstrate this. This means that the car should only be available to staff during working hours and should never be used for personal journeys.

CLAIMING VAT ON NEW CAR PURCHASES

It is also possible to claim back the VAT on a new car that is purchased for a business-related activity such as for use as a taxi, self-drive hire car, or a car for driving instruction.

If your business leases a car for business purposes, then you can normally reclaim 50% of the VAT paid. Also, 100% of the VAT can be reclaimed if the car is used exclusively for a qualifying business purpose, such as a taxi or a car for driving instruction.

The rules are generally more straightforward for the purchase of commercial vehicles such as a van, lorry, or tractor that are used only for business. Input paid on these purchases would normally be fully recoverable.

The VAT incurred on the purchase of motorcycles, motorhomes, and motor caravans, vans with rear seats (combi vans), and car-derived vans can also be recovered if the vehicles are used solely for business use. 

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