What VAT can a businesses reclaim on a car lease?
Questions about reclaiming VAT on a car lease is one we get asked the most. The benefits of leasing your vehicle are made clear below & we have summarised the answers to the most frequently asked questions below. Business expenses, including VAT, mileage and allowances can vary and we always encourage you to verify what applies to you with a registered accountant.
Reclaiming VAT on company cars 🚗
VAT on Purchase:
If you purchase a car through your business, the only time you can only claim the VAT back is if you can prove than the car is used exclusively for business purposes. This means no personal use whatsoever – Not even on the odd occasion. For many businesses it is very, very difficult to prove to an inspector and therefore challenging to reclaim.
Lease Agreements:
That’s what we are here for. Leasing cars for businesses makes up a large proportion of the services provided by Ready2Lease. When you lease a car through your business you can reclaim 50% of the VAT on every lease payment, including the initial rental and monthly rental. As with purchasing a vehicle, if you can prove the vehicle is solely used for businesses purposes you can reclaim 100%.
VAT on Running Costs:
How you obtain the vehicle does not have a bearing on the VAT you can reclaim on maintaining the vehicle, including general repairs and servicing. So long as the vehicle is being used for business purposes you can reclaim 100% of the VAT. Fuel and other vehicle consumables are also included in this. Be careful not to overclaim though, if the vehicle is being used for personal reasons, then an adjustment needs to be made and therefore accurate mileage records should be kept.
Electric Cars
EV’s are taking over the world when it comes to company cars and business use. Companies want to help the planet and reduce costs; drivers want lower BIK taxation and manufacturers are being scrutinized to ensure an ever-increasing adoption of electric vehicle technology. There are variations to capital allowances, different rules for benefits-in-kind – all favourable.
Keeping records for your business
That’s not something we can help you with, but even an excel sheet would suffice for many businesses. Keep a record of every journey made and every expense the vehicle uses. Keep receipts or scan them to a file, you may need them further down the line and your finance team will no doubt be grateful. Making incorrect claims can lead to penalties, which everyone wants to avoid.
