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VAT on Secondhand vehicles

Are you able to reclaim VAT on the purchase of secondhand vehicles for the business?

If it’s a car, (whether new or secondhand), you’re unlikely to be able to recover the VAT. If it’s a van, you may be able to recover the VAT, (but read the section below about motor dealers using the Margin Scheme).

There are rules that specifically prevent the VAT on a car being recovered. Generally, the only instance you may be able to recover the VAT on a car is if it will be used exclusively for business use, mainly as a taxi, driving school car, hire car or you’re a car dealer and the vehicle is stock. 

As with any expense you're looking to recover the VAT on, you will also need a proper VAT invoice. One of the things to make sure of, is that the VAT amount is identified on the invoice. If the invoice does not show the VAT amount, the motor trader may be operating the Margin Scheme for secondhand vehicles (it will be stated on the invoice if they are using the Scheme). In this instance, you won’t be able to recover any VAT even if you meet the conditions described above. 

This answer assumes the motor trader is registered for VAT, your business is registered for VAT, the vehicle is secondhand, the vehicle will be owned by a business or trader and the vehicle will have some business use.

Structuring your motor running expenses and the ownership of vehicles is so important to your business, because there are VAT, capital allowances and income tax implications that can be quite costly if you get it wrong. Make sure your affairs are structured correctly and contact your local TaxAssist Accountant for more information.

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