Stanley Dencher, specialist tax writer at Wolters Kluwer, considers two recent cases which HMRC has lost regarding whether input VAT is recoverable on company car purchases when private use is prohibited
Many company drivers wish both to purchase a high-end car, and to reclaim all the VAT that was incurred on the purchase. Generally, input tax cannot be recovered on the purchase of a car for use in a business. The First Tier Tribunal (FTT) has occasionally overturned HMRC’s rejection of claims for such input tax, but only where the FTT was satisfied that certain conditions have been met.
The conditions for reclaiming input tax on the purchase of a car are in Value Added Tax (Input Tax) Order 1992 (SI 1992/3222), art. 7. VAT may be reclaimed if the car is supplied to a taxable person, who intends to use it only for the purposes of a business carried on by him or her. However, a taxable person is not taken to intend to use a motor car exclusively for such purposes if he or she intends to make it available for private use, whether or not for a consideration.
