If a leased company car is not left at the premises of the company for security purposes overnight, can I reclaim 100 per cent VAT rather than the cap of 50 per cent on the lease hire of the vehicle? Does 50 per cent VAT reclaimable apply to the purchase of fuel?
The default VAT recovery for most leased company cars is 50 per cent. A full 100 per cent recovery is available for specific categories of vehicles where the government considers that there is a greater certainty of near total business use, such as a driving school car or certain types of taxis.
Having said that any company leased car can is entitled to a 100 per cent VAT recovery if it can be shown that the vehicle is exclusively for business use. It would therefore be generally the case that the vehicle never left the businesses premises outside of work periods.
If you are removing the car in this instance from the business premises you need to be very sure that there is not going to be any element of private use associated with this and demonstrate it to HMRC if challenged.
The VAT recovery on fuel is a lot more complicated. If you wish to avoid complexity then you do not need to reclaim any of the VAT on road fuel but you will then need to make sure you do not seek to recover VAT on fuel for all other vehicles. In addition, you will be suffering a cost disadvantage by not reclaiming the VAT.
Generally speaking, the thinking behind road fuel input tax deduction is that you only claim back what is used for the business. If you claim back all the VAT that is fine as well but you then need to make sure that the benefit in kind scale charge is applied for the private use of fuel. Most businesses will operate on this basis.
If you intend to only claim back VAT for the part that relates specifically to business you need to ensure that you operate your business record keeping well enough and in sufficient detail to prove that the input tax recovery is accurate. This being VAT you can also be sure that HMRC will check up on this aspect of your record keeping in due course.
See also: Catering and VAT