Although it is relatively well known that a pre-tax lock applies to the purchase of a car that is not exclusively for business purposes, the details of the definition of a car and the rigor of the exclusive professional use condition are often overlooked when it comes to whether you can recover VAT on a company car. The definition of a vehicle is set out in Section 2 of VAT Notice 700/64 `VAT on the costs of motor vehicles`. These guidelines faithfully reflect the Input Tax Restriction Act (contained in Article 2 of the VAT (Input Tax) Ordinance 1992 SI 1992/3222) and stipulate that (emphasis added): If you sell a car on which you have been charged VAT but you have not been able to recover part of that VAT, you do not have to charge VAT on the sale and cannot issue a tax invoice. This is because the sale of the car is excluded. Any input VAT levied directly in connection with the sale (e.g. VAT on auction costs) is exempt from input TAX. For more information, see Communication 706: Partial Exemption. If you later purchase accessories and the vehicle is owned by the company or used in the business, but it is not owned by the company (perhaps the car of an employer or administrator), the VAT charged is not an input tax, unless the accessory has a professional use. If you are a sole proprietor or partner and you use a vehicle exclusively for your own private car traffic, you cannot recover VAT on repairs as input tax. Most accountants and tax advisors have been asked the seemingly unanswered question: I bought a car only for business purposes – can I claim VAT? Before you recover VAT on a vehicle purchase, you need to determine if the vehicle is a car, as there are rules that govern the PROCESS of recovering VAT on car purchases and leasing contracts. This blog will give you a detailed overview of whether VAT on newly purchased cars can be recovered using case law. In order not to suffer from a problem with the AEAT in terms of deducting VAT from a company car, there are certain ways in which you can prove that the car is used exclusively and exclusively for the exercise of the professional activity: in general, the VAT levied on the current operating costs of company cars and vans (for example, maintenance and fuel costs) can be recovered from eligible companies subject to VAT. You may also be able to claim all VAT on a new car if it is mainly used: If your business is subject to VAT and provides its drivers of company cars or vans with free fuel for private motor vehicles, you will have to charge VAT to drivers on this benefit.
It is important to determine whether a vehicle is a van or a car for input VAT claims. Input tax is usually blocked when buying a car, unless it is used exclusively for business purposes, while it can be recovered when buying commercial vehicles (including vans). Contact MCL Accountants on 01702 593 029 if you have any questions about refunding VAT on a company car or if you need help creating and filing your business accounts or self-assessment tax returns with HMRC. It is important to note that if you choose not to recover input tax on a vehicle`s fuel, you cannot recover VAT on another vehicle used in your business. Can you recover VAT on the company car? With the growing popularity of electric cars, this is a question that has been asked several times recently by employers who provide their employees with a company car. If a car is mainly used for relevant purposes, i.e. as a taxi, for autonomous rental or for driving lessons, the refund of input tax will not be blocked, even if private use takes place and you can recover VAT on the company car. Q. If I sell a car for which I was able to claim VAT at the time of purchase, do I have to charge VAT on the sale? However, if a car is converted into a van after purchase, it is not possible to go back and recover the VAT incurred on the first purchase. However, if the conversion is carried out for commercial purposes, the input VAT is refundable according to the partial exemption position of the company. Q: I am a sole proprietor and I use my personal car in my business.
Can I claim VAT on repairs and maintenance of my car? In these cases, you should keep in mind that all deductible expenses must be justified by the corresponding invoice and all costs must be recorded in the records of purchases and expenses for income tax purposes and in the book of invoices received for input tax purposes. If you reimburse your employees for the road fuel they consume, you can treat the VAT they pay as input tax. However, you must be able to prove that you reimbursed them for their actual expenses for road fuel. The payload of a vehicle can be confirmed on the basis of the manufacturer`s specifications, and if it is one tonne or more, it is not a motor vehicle for VAT purposes and the input tax block does not apply, so you can recover VAT on a company car. Many manufacturers use the payload as part of their promotional materials, for example by announcing that it has a “VAT-friendly payload”. The case of Gerald David Jones was the first lawsuit to address the issue of VAT refunds when a car is purchased for business purposes with insignificant private use. The case concerned a farmer who had used a car for the farm and another vehicle for his personal use. Although the court acknowledged that the car in question was not used for private car traffic, it found that this was irrelevant: the car was available for private use, which meant that VAT could not be recovered on its purchase. There are several ways to recover VAT on fuel if you are not entitled to pay a fixed rate under the flat-rate scheme. If the automatic lock does not apply, you can recover VAT on company cars As for the purchase of new cars, you can recover the entire VAT on fuel if the vehicle is used exclusively for business purposes.
As of January 1, 2006, you will need to keep invoices issued to your employees when the fuel is delivered to them. This can be a full VAT invoice or a less detailed VAT invoice. Input VAT may be levied only on the cost of fuel used for commercial purposes for the manufacture of taxable supplies.