Input VAT Recovery on the Purchase of a Car

Input VAT deduction, in relation to the purchase of a car, is permitted where a vehicle purchased by a taxable person will be used exclusively for business purposes and would not be available for private use by any person, including the purchaser.


In the case of Jane Borton vs HMRC, the taxpayer was a sole-trader in the building trade and purchased a vehicle with the intention of using it for business purposes. The relevant vehicle was registered and kept at business premises, although this address happened to also be the taxpayer’s private address, and was insured for business use only.  On appeal of HMRC’s original decision to deny input VAT recovery, the First-Tier Tribunal considered Article 7 of the VAT (Input Tax) Order 1992 and, more specifically, whether at the time of purchase, the taxpayer’s sole intention for its use was that relating to a business purpose.


The First-Tier Tribunal concluded that, due to the arrangement of insurance cover that only extended to the use of the car in a business capacity, e.g. the transportation of tools and building materials, it was clear that there was no intention by the taxpayer to use the vehicle for any other purpose than that relating to business activities and therefore the Appellant was entitled to input VAT recovery on the purchase of the car.


To discuss alternative scenarios under which recovery of input VAT incurred in relation to the purchase of a car is permitted and to determine what conditions must be met to facilitate recovery, speak to one of our consultants today via our free VAT helpline.

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