Can I reclaim VAT on buying or leasing a car or van?

For most businesses, VAT on purchasing a car cannot be reclaimed where it is available for private use. An exception can apply where the car is used exclusively for business and is not available for private use, or where it is used for particular activities such as qualifying taxi, driving instruction or hire work. Calling a vehicle a company car does not satisfy that test. Vans and other commercial vehicles follow different rules, with recovery generally tied to eligible business use. Check the vehicle’s VAT classification rather than relying on a sales description, especially for unusual vehicles and pickups. The accounting and employment tax classifications are not always identical.

Where a leased car is available for private use, the usual restriction blocks 50% of the VAT on the leasing charge. Separately supplied maintenance can have different treatment, so read the invoice carefully. For purchases, there must actually be recoverable VAT: a second-hand vehicle sold under the margin scheme will not provide a separately claimable VAT amount. Your VAT scheme, any exempt activities and the balance of business and private use can also affect the claim. Keep the invoice and evidence supporting the treatment. CASS can check the likely VAT recovery before you commit to a vehicle, alongside the separate tax, benefit and cash flow implications.