Claim VAT Back On Motor Vehicles

Posted in Tax Saving, VAT

Accountable persons can deduct up to 20% of VAT incurred on the purchase, hiring, intra-Community acquisition or importation of certain qualifying vehicles, subject to the normal rules on deductibility.

Qualifying passenger motor vehicle

A qualifying passenger motor vehicle is a vehicle that:

  • has C02 emissions of less than 156g/km (i.e. C02 emission bands A, B and C).

Motor vehicles include estate cars, sports motor vehicles, station wagons, motor cycles, motor scooters, mopeds and autocycles.

Business use

Business use means use for either taxable activities, exempt activities or a mixture of both, but does not include private use.


Where a vehicle is used for a taxable activity, a percentage of the VAT can be deducted.

Where a vehicle is used for an exempt activity, no deduction is allowed as per the normal VAT deductibility rules. Where the vehicle is used for both taxable and exempt activities, a percentage of VAT can be deducted.

Changing circumstances

If circumstances change i.e. a vehicle is disposed of within 2 years, or it is used for less that 60% business purposes, and VAT has been deducted, then the accountable person is required to make adjustments in the relevant taxable period.

There is no adjustment if the vehicle was hired or leased.

Vehical disposal

The accountable person must repay all or some of the VAT deducted depending on the period of time the vehicle was used, in the taxable period when the vehicle was disposed.

The following adjustment rules apply:

Disposal within 6 months from date of purchase, acquisition or importation of the vehicle.Adjustment of all VAT deducted.
Disposal in the period 6 to 12 months from date of purchase, acquisition or importation of the vehicle.75% adjustment of all VAT deducted.
Disposal in the period 12 to 18 months from date of purchase, acquisition or importation of the vehicle.50% adjustment of all VAT deducted.
Disposal in the period 18 to 24 months from date of purchase, acquisition or importation of the vehicle.25% adjustment of all VAT deducted.
Disposal after 24 months from date of purchase, acquisition or importation of the vehicle.No adjustment.

Business use change

Similar to the rules applying to the disposal of a vehicle, there is an adjustment of all, or part, of the amount deducted if a vehicle is no longer used for business purposes, or is used for less than 60% business purposes, at any time within 2 years of purchase, intra-Community acquisition or importation of the vehicle. There is no adjustment if the vehicle was hired or leased.

The following adjustment rules apply:

Business use discontinues (or is used for less than 60% business use) within 6 months from date of purchase, acquisition or importation of the vehicle.Adjustment of all VAT deducted.
Business use discontinues (or is used for less than 60% business use) in the period 6 to 12 months from date of purchase, acquisition or importation of the vehicle.75% adjustment of all VAT deducted.
Business use discontinues (or is used for less than 60% business use) in the period 12 to 18 months from date of purchase, acquisition or importation of the vehicle.50% adjustment of all VAT deducted.
Business use discontinues (or is used for less than 60% business use) in the period 18 to 24 months from date of purchase, acquisition or importation of the vehicle.25% adjustment of all VAT deducted.
Business use discontinues (or is used for less than 60% business use) after 24 months from date of purchase, acquisition or importation of the vehicle.No adjustment.

You should always seek professional advice before you undertake a SURE investment.

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