Reclaiming VAT on personalised number plates

As a business owner, you might be thinking about changing your vehicle when the next batch of new registrations hits the road.

At the same time, you might also be considering a personalised number plate. You may have heard that it is possible to reclaim the VAT as input tax on the purchase of a personalised number plate for a business vehicle. 

But is this true?

Can you reclaim VAT on number plates?

In order for VAT incurred on a cost to be reclaimed as input tax, there must be a direct connection between the spending and the taxable activities of the business. For example, if costs are incurred in advertising the business to potential customers.

In the past, tribunals have generally sided with HMRC, especially when there hasn't been evidence to support the idea that a business gained any benefit from purchasing a personalized number plate.

Personal enjoyment vs Business purposes

In most cases, HMRC is likely to consider a personalised number plate as a personal expense rather than a business one. To reclaim the VAT, you must show that the number plate was purchased for promoting the business or for resale.

To support your decision to buy a personalised plate, it's important to keep records and ensure that the personalisation relates to the business name, rather than just your own initials. This will help provide evidence of your decision-making process.

Example 1: Where the business won its appeal.

In Hooper (VTD No 19276), a sole trader restaurant owner successfully argued that the VAT incurred on purchasing the registration number “HO 02 PER” was reclaimable.

The restaurant was situated in a small village away from a main road and prior to its acquisition, had been closed for two years. Mr Hooper said that the personalised registration had been the most effective method to raising awareness of the restaurant as he worked to build up a local clientele; it became known locally as “Hoopers” rather than by its actual name of “The Windmill”.

The tribunal accepted that a car registration could form part of a local campaign to obtain publicity. It concluded that, on the balance of probabilities, the purchase of the personalised number plate was for business purposes and allowed the appeal.

Example 2: Where the business lost its appeal.

In Ava Knit Ltd (VTD 1461), the number plate (714 ROD) reflected the name of the company director and bore no relation to the company name, and therefore the business had its claim for input tax on the cost of a personalised number plate disallowed.

The tribunal held that the number plate was not for the purpose of the company’s business, but rather for the personal enjoyment of the director.

There can be circumstances in which it is possible to reclaim the VAT on a personalised number plate but there must be evidence to demonstrate that the intention was for the promotion of the business and not for the personal benefit of the individual. The inclusion of personal initials should be avoided, and the number plate should provide a recognisable link to the business.

When to seek advice

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, Option to Tax and DIY house builds.