HMRC introduces a 'self-serve' scheme. VAT on fuel and mileage . If you charge for the private use of fuel and the charge is not below the purchase price, then you should account for VAT on the amount charged. Some great feedback for our Compliance Manager Dan. This applies to all road fuel bought by the business, whether it’s used in cars or commercial vehicles. This means that your business or any previous owner has recovered the input tax on the purchase in full. As a rule of thumb, if the payments you make include an amount for VAT you can reclaim 50%. HMRC publishes rates on Company cars - advisory fuel rates for company cars but also accepts rates set by recognised motoring agencies, for example, RAC, AA. You must issue a tax invoice to a VAT-registered buyer who requests one. Input tax on repairs and other motoring expenses, 6. If you account for all the private use in this way you may claim all the VAT incurred if you’re fully taxable (see paragraph 8.2). A ‘self supply’ means that you must account for output tax at the time of the change of use on the current value of the car. The 50% block is to cover the private use of the car. The rules are the same and are broadly summarised in VAT Notice 700/64. If you sell a car on which you recovered VAT (perhaps a driving school car or a pool car) then you must account for output tax on the full selling price. Such cars will be sold on a normal tax invoice with VAT charged on the full selling price. The scale charge for a particular vehicle is determined by its CO2 emissions figure. Grab a biscuit and a brew and read our latest news. The input VAT restriction applies to any business that provides a lease car to a co… vat on car lease Hi Stuart. If there is nothing actually preventing private use, then it cannot be said to be only intended to be … If you’re unhappy with our service, please contact the person or office you have been dealing with. If you have a PCP which is a deemed to be a hire contract, you may be able to recover half of the VAT … You must include a statement as to whether or not each car that you lease is a ‘qualifying car’ on the tax invoice you issue. £2bn Kickstart scheme – Can your business really take on 30 young workers though? Avoid paying VAT on leasing payments (if VAT registered). Charging for the private use of fuel bought by the business, VAT (Input Tax) Order 1992 (SI 1992 No 3222), VAT (Input Tax) (Reimbursement by Employers of Employees’ Business Use of Road Fuel) Regulations 2005 (SI 2005 No 3290), adapting or modifying a car for the use of the disabled, taxi, driving instruction car, or self-drive hire, Notice 700/57: administrative agreements entered into with trade bodies, Notice 718/1: the margin scheme on second-hand cars and other vehicles, Notice 718: the margin scheme and global accounting, VAT on movements of goods between Northern Ireland and the EU, Company cars - advisory fuel rates for company cars, The Society of Motor Manufacturers and Traders Limited, customerexperience.indirecttaxes@hmrc.gsi.gov.uk, Local authorities and similar bodies (VAT Notice 749), Apportionment VAT Retail Schemes (VAT Notice 727/4), The Margin Scheme on second-hand cars and other vehicles (VAT Notice 718/1), Coronavirus (COVID-19): guidance and support, Transparency and freedom of information releases, the VAT treatment of motoring expenses incurred by your business, what vehicles qualify and whether you can claim back all or some of the VAT charged (the reclaiming of some input tax on motoring expenses is not allowed or is ‘blocked’), what you can and cannot treat as input tax, is constructed or adapted mainly for carrying passengers, has roofed accommodation to the rear of driver’s seat that’s fitted with side windows or that’s constructed or adapted for the fitting of side windows, vehicles capable of accommodating only 1 person or suitable for carrying 12 or more people including the driver, vehicles of not less than 3 tonnes unladen weight, special purpose vehicles, such as ice cream vans, mobile shops, hearses, bullion vans, and breakdown and recovery vehicles, vehicles with a payload of 1 tonne or more, fitting a side window or windows in a van to the rear of the driver’s seat, fitting a rear seat or seats to a van - even without side windows, produced by the manufacturer who intends to sell it within 12 months of its production, obtained by a dealer who intends to sell it within 12 months of the date that VAT was incurred on its purchase, acquisition or importation - stock in trade cars do not include second hand cars that are not qualifying cars, hire with the services of a driver for the purpose of carrying passengers, normally kept at the principal place of business, hire with a driver for carrying passengers, optional services - unless they’re supplied and identified separately from the leasing supply on the tax invoice, excess mileage charge - if it forms part of a supply of leasing but not if it was incurred on an excess mileage charge that forms part of a separate supply of maintenance, termination payment and any associated rebate of rental as taxable, is sold on to you in exactly the same state, was obtained by the insurance company, finance house from a person who would not have charged VAT on its supply, for example, a private individual, claim the VAT charged - but strictly subject to paragraphs, claim the VAT charged - subject to paragraphs, use detailed mileage records to separate your business mileage from private mileage - see paragraph, both business and private motoring as long as you apply the appropriate fuel, whether the journey is both business and private, the number of cars for which the scale charge is applied, the cylinder capacity of each car where a car is too old to have a CO2 emissions figure, if a car is changed, your records should show the date of the change. If you terminate your lease early, the leasing company may choose to either treat both: If it chooses to tax, it will normally offset the termination payment against the rebate and issue you with a tax invoice for the difference. If fuel bought by your employees for business is put into private use, you must account for output tax on the private use using the scale charges or the value. From 1 October, the limit for TTP, the online payment plan service used to s…. You can also reclaim 100% of the VAT you pay where your business arranges and pays for the cost of the servicing, etc. It is not acceptable to use the scale charge for some cars and another method of accounting for the VAT due on the private use of the fuel bought by the business for other cars. VAT recovery on cars and vans - leased vehicles. You must account for output tax for each car in which your business fuel is made available for private use. The input tax deduction rules with regard to partial exemption are unaffected by these changes. Cars used as taxis or as driving school vehicles are exceptions, although you may need to account for VAT for any private use. Only 50% of the lease hire VAT is recoverable, whilst all of the VAT for repair and maintenance is recoverable. If acquired as a result of an insurance claim, or a finance house has repossessed it, you will not be charged VAT provided the vehicle: You can resell such vehicles using the margin scheme. At the end of your lease, just hand the keys back. We love hearing what our clients think. You can recover the VAT incurred as long as it’s: Cars bought or imported for the purpose of sale and lease back will not be treated as available for private use provided you account for output tax on the resale to the leasing company in the same tax period as you recover input tax on the purchase. You can convert a commercial vehicle into a car for VAT purposes. Therefore, ensure you obtain a VAT invoice for your payments at least once a year. If the rebate exceeds the termination payment, the leasing company will issue you with a VAT credit note for the balance. If you buy accessories later and the vehicle is either owned by the business or used in the business but not owned by it (perhaps an employer or director’s own car), the VAT charged is not input tax unless the accessory has a business use. We use this information to make the website work as well as possible and improve government services. Warranty & tax included Or you can account for VAT on the higher of the scales instead of apportioning. Employers who bring back employees from furlough and keep them continuously employed until…, Since the coronavirus crisis hit, it is fair to say that HMRC have adopted a ‘go-slow’ approach in so far as tax enquiries are concerned and…, Local lockdowns and the Job Support Scheme, The Job Support Scheme replaces furlough at the start of November. 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