Everyone loves a good deal and to be able to help the environment – and electric cars are a good deal for income tax as a company car, as well as being ‘green’. But what about the VAT on your electric car purchase? What can you reclaim and what can’t you reclaim?
The bad news is that VAT can only be reclaimed on cars in limited circumstances.
The first tax rule is that VAT is not recoverable on the purchase of an electric car if there is any private use of the car … or if it is simply available for private use. Obviously this means that for most people, you can’t reclaim the VAT on purchase.
Change the Deal!
But changing how you finance the car changes your VAT rules! If you were to contract hire or lease an electric car, then despite any private use of the vehicle you can reclaim half of the VAT on the financing element – ie the cost of the car. If you have a maintenance agreement on your electric car, then you can reclaim all of the VAT on the maintenance agreement.
In certain circumstances you can get HMRC to accept that you use the vehicle exclusively for business purposes, and therefore that you can get 100% of the VAT back. In order to do this you need to be able to provide evidence! You’ll need evidence that the car is not intended for or available for private use: for example, a pool car that is kept at the principal place of business when not being used for a business journey.
If you’d like advice on the VAT position for this or any other purchase, get in touch with us for help.
