Buying a car through your business

If I bought my car for £7,000 + VAT and use it 50/50 for business and personal use. How much can I claim back? I’m so confused.

With certain exceptions a taxable person cannot reclaim input tax on the purchase of a car and no VAT is chargeable when a car is sold unless the selling price exceeds the purchase price.

An exception is if a car is purchased for “Exclusive business use”. HMRC regard a car as being used exclusively for business purposes if it is used only for business journeys and is not available for private use. Another exception is if the taxable person intends to use the motor car primarily:

  • To provide it on hire with the services of a driver for the purposes of carrying passengers
  • To provide it for “self drive hire”
  • As a vehicle in which instruction in driving of a motor car is to be given by him

I assume that you paid in full for the car. If you had financed the purchase by a lease-rental 50% of the VAT on the monthly rental costs could be reclaimed as input VAT. If you paid by hire purchase the instalments are not VATable.

So unless you are in one of the exceptions outlined above you cannot claim the input VAT.

See also: Buying commercial vehicles for tax reasons – Should I buy a commercial vehicle (e.g. van) rather than a car for tax purposes?

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