12th June 2018

VAT bonus for motor running costs

VAT on a car purchase for business and private use

The VAT paid on a car purchase can not be reclaimed if it is used for any private use. An apportion between business and private use can not be applied here as it can for other expenditure.

The good news is that this block doesn’t apply to motor running expenses.

VAT paid on expenses relating to a business journey, for example off-road parking charges, can be reclaimed in full.

For some types of expenses you may need to apportion VAT between business and private use, as in the case of a petrol bill.

VAT on motor service costs

Even where there’s significant private use of a car, HMRC allows you to reclaim 100% of the VAT paid on the cost of repairing and maintaining your car. This is not just for company cars bought by the business. Personally owned cars have the same rules applied.

There’s no minimum business use requirement to take advantage of this. In theory you might only use your car for business 5% of the time. Your business can still reclaim 100% of the VAT on the service costs if you charge the service costs to the business. HMRC does not require the usual apportionment between business and private use for these service costs.

Reference: https://businessdatabase.indicator-flm.co.uk/business_advice_directory/articles/vat___cars/motor_expenses___an_unexpected_vat_bonus/UKTATXAR_EU18140301/122/featArt