It seems that with every VAT rule – everything you think you know – there are a bunch of exceptions surrounding it. Motoring expenses are a great example of this – as a rule, you can’t claim VAT when a car is bought, unless…
There is a lot to it, and we know there are plenty of people out there scratching their heads over these rules. So, as simply as we can, let’s see if we can explain things.
VAT can be reclaimed on cars that are mainly used as a taxi, self-drive hire or driving instruction car. Any other type of car used for business purposes must be used exclusively for business purposes – that means not even being available for private use. And before you ask, ‘private use’ includes the commute to and from work.
This rule is also true of other vehicles. Commercial vehicles like tractors or vans, motorcycles and motorhomes can all be reclaimed on so long as they are only used for business.
Maintenance, parking, and other costs
Even if you can’t reclaim VAT on the vehicle itself, many business-related costs do qualify. For example, for any repair work on a vehicle that is paid for by the business, VAT can be reclaimed. Many off-street parking options charge VAT at the standard rate, and this can be reclaimed for business trips.
I’m sure you are noticing the pattern and know what I am about to say; if the vehicle is used only for business, then all VAT on fuel can be reclaimed.
It is a bit more complicated for vehicles used for both business and private, and there are two ways to go about it. The first is to keep detailed mileage records and just reclaim on the business use fuel, the second is to reclaim all VAT and pay a fuel scale charge.
A fuel scale charge is worked out using your vehicle’s CO2 emissions figure, and can be worked out at gov.uk.
Businesses must always be able to show how they have worked out their claims; records of business journeys are integral to working out claims and cars that qualify must have the records to prove it. It can be a pain keeping all this organised, but believe me your bookkeeper will thank you!
In conclusion, it’s really important to know all the exceptions to every VAT rule, and really important to stay up to date. If you are still scratching your head and need to find out more, email us at firstname.lastname@example.org or phone 01858 289189. We’d be happy to help!
If you want to talk to us about your bookkeeping or accountancy requirements, we offer completely free of charge business consultations so we can get to know each other and see if The Business Hut is a good fit for your business.
Thanks for stopping by,
Source: gov.uk goes into much greater detail clarifying many of these points, with VAT Notice 700/64 a particularly important resource.Tags: accounts, accounts market harborough, bookkeeper market harborough, bookkeeping, business hut, hmrc, tax