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Sometimes a question comes up that leads to an interesting answer. When that happens, we think that we should share the answer as widely as possible. This time, the question is, can a company reclaim VAT on a car purchase?

It is generally understood that if a company purchases a car that VAT cannot be reclaimed on the purchase.

However, there are some instances, where taxpayers are succeeding in claiming VAT on a car purchase. The bar to achieving this is high but in some cases, it can be done, particularly if you are aware of the requirements in advance.

The key point is that the car must be incapable of being used privately. But what does that mean in practice?

Typical indicators would be as follows:

  • It is insured for business use only;
  • Employees have signed a document confirming that the vehicle is only to be used for business purposes;
  • It is paramount that the car is never taken home or used for any non-business purposes; and
  • HMRC would expect to see a mileage log confirming all use of the car is for business.

Clearly these requirements are difficult but not impossible to achieve and in the right circumstances a VAT reclaim on the purchase of a car may be successful.

If you would like to discuss this or any other area of accounting with us, please contact the team here.