VAT – Cars & Vans


HMRC have recently updated their list of vehicles which they consider to be either a car or van.  The reason that this is important is that VAT is fully recoverable on commercial vehicles used in the business (including vans), however in the vast majority of circumstances VAT isn’t recoverable on the purchase of a car.  The problem arises with combination vans, which have additional seating or other attributes that are more “car” like.  In simple terms if a combi van or double cab pick up has a payload of more than a tonne then it will be classed as a commercial vehicle.  The result of which is that within a single range of vehicles by a manufacturer which may appear very similar in appearance, one vehicle may be deemed to be a van/commercial vehicle and the other a car.


It is therefore extremely important that when purchasing a combi van or double cab pick the rules are checked, otherwise you might get an unpleasant surprise on your next VAT inspection.


It is also worth noting that if you can demonstrate that a car is used 100% for business then the VAT is recoverable.  However detailed evidence needs to be maintained and retained.


Click here for HMRC’s updated list


HMRC also provide the following guidance: