Claim VAT back on cars

In the past it has been very difficult to claim back the VAT when a business buys a new car. But a recent case may be changing things.

Theoretically, you can reclaim the VAT if the car is used solely for your business as long as its not available for private use. However, the VATman usually strongly resists any attempt to claim back the VAT and he has won case after case on this very point.

However, the VATman has lost a recent case - Elm Milk Ltd. The company board minuted a resolution that the company did not intend to make the car available to anyone for private use, and it would be in breach of an employee’s terms of employment to use it for private purposes.

The reasoning behind the court’s decision seems to be that although the car was physically available for private journeys, it was not the company’s intention to make it available for private use. So if you want to take advantage of this make sure you have a formal board minute which states that the car must not be used privately. On a £20,000 car, this will save you nearly £3,000.

Remember, you can’t use the car for home-to-work travel, but if you work from home this shouldn’t be a problem. To strengthen your case, you should also have access to another car for private use.