Tim Palmer outlines the current position relating to businesses claiming the input tax back on the purchase of a ‘business use only’ car.
A question sometimes asked by advisers is: can a business recover the VAT when it purchases outright a ‘business only’ car? When ascertaining the answer, it is important to consider the background position.
The treasury may, by order, provide that VAT charged on specified supplies, acquisitions and importations is excluded from credit for input tax against output tax. (VATA 1994, s 25(7)). Provisions specifically relating to motor cars have been made under The VAT (Cars) Order 1992 (SI 1992/3122) and the VAT (Input Tax) Order 1992 (SI 1922/3222), as amended.
Exceptions to the general rule
With some exceptions, a taxable person is not able to reclaim the input tax on the purchase of a car. The main
