VAT on Commercial Vehicles - How it works

Most businesses understand that they can claim Input VAT on commercial vehicles, unlike cars on which the VAT is blocked. But what is classed as a commercial vehicle?

You would think that it was easy to identify a commercial vehicle, such as an HGV or a transit van and in most cases it is. However vehicle companies manufacture many vehicles that have a dual purpose.

What are Dual Purpose vehicles?

These vehicles are car derived vans which are sold as lifestyle vehicles that can also be used for private use. They may look similar to cars but the manufacturer will have altered the inside so it can be sold as a commercial vehicle. For example the rear windows, seats and seat belts may have been removed.

In 2015, HMRC produced a list of dual purpose vehicles such as combi vans which highlighted which vehicles are classed as commercial and which are not.  However, they have now not updated this list for over four years.

How to claim back VAT on commercial vehicles

If you are claiming back the VAT on a commercial vehicle it is important to identify when it is being used for private use, as the VAT man will expect to be able to thoroughly check when this is occurring!

If there is any private use then there should be an adjustment to the VAT claimed. The VAT man will allow for occasional personal use of a commercial vehicle, but it is important to be able to prove it is only incidental use.

In essence, if you buy a commercial vehicle for your business you can often reclaim the VAT in full. However, if it has a dual purpose and it is used significantly for personal use, there will be a restriction on the VAT that can be reclaimed.

• Read more: VAT on repairs, fuel and other motoring expenses

How can Shorts help with VAT queries?

VAT remains one of the least understood of all taxes, which is why we set up a specialist VAT advisory department, to help guide businesses through the complex maze of VAT legislation.  

Our team help with all areas of VAT from relatively basic issues such as initial registration, the completion and submission of VAT returns and advice on how to correct errors and mistakes, through to more complex issues such as assessments, control visits, cross border transactions and DIY house builds.