BU S I N E S S TA X
VAT AND CARS nrbpqflkW= private use unless positive steps are taken to insulate recently purchased a car for use in my business. The
I
the car from the possibility of such use. It is particularly
car dealer said it is a qualifying car but I’m hearing
difficult to convince HMRC if a business is run from
conflicting advice on VAT. Can I claim back the VAT or
home and the car is kept there, but if it is genuinely the
not?
case that the car is only for business journeys and you use other vehicles for all private use, this should not
^kptboW=
prevent you from recovering the VAT. Obviously, the more steps that are taken to demonstrate business use
P
only, the stronger the argument would be.
use.
In order to demonstrate that the car is not available for
ossibly, it depends on your specific trading activity or whether you can demonstrate exclusive business
private use, steps that could be taken include: VAT recovery on the purchase, acquisition, or
• business use only clause for insurance purposes;
importation of a motor car is generally blocked.
• detailed mileage logs linking each journey to a
The term ‘qualifying car’ is widely misunderstood; not
• the vehicle not to be allocated to any individual
business purpose; least by car dealers who often tell potential purchasers
(pool cars);
that it means the car qualifies for VAT recovery.
• garaging overnight at the business premises where
A car is a qualifying car when it has not been subject to
• including in employment contracts a clause making it
the VAT block and therefore VAT is charged on its sale.
a disciplinary offence to use the car for anything
The block does not apply to a car to be used for one of
other than a business journey.
this is not the home address, and
the following purposes: 1. as stock in trade of a motor manufacturer or dealer;
Where VAT has been recovered on the purchase of a
2. primarily for the purposes of taxi hire; self drive hire
car, the eventual sale of the car will require you to
or driving instruction, or
charge standard rate VAT. Where VAT has been
3. exclusively for a business purpose and not made
incurred but blocked on the purchase, the future sale is
available for any private use.
exempt from VAT.
The three relevant purposes can be seen as offering
Tax Adept offers a range of services which are
three distinct routes for the recovery of VAT on cars.
specifically designed to help you and your
Thus traders engaged in taxi hire, self drive hire or
business. You can find further information on tax-
driving instruction need only demonstrate that the car
saving measures in the Resources section of our
will be used primarily for the purposes of their business,
website: www.taxadept.co.uk. Please contact via
whereas most other traders (apart from dealers and
telephone on 01444 230777, or visit our website.
manufacturers) will need to demonstrate exclusive business use and non-availability for private use. HMRC are strict in their interpretation of the condition “used exclusively for a business purpose” and take the view that a car bought by a business is available for
6
JUNE/JULY 2020
This article is based on current tax guidance at date of publication and may be subject to change. Any advice shared here is intended to inform rather than advise. If you take, or do not take action as a result of reading this information, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.
Tax Adept ACCOUNTANTS
Please mention BURGESS HILL Pages when responding to adverts
