No VAT recovery where cars have private use
A recent VAT Tribunal case examined the well worn topic of taxpayers seeking to reclaim the VAT cost of cars they argue are used exclusively for business purposes. In this case the taxpayers operated two unincorporated businesses comprising plant hire and pedigree pig farming.
HMRC made enquiries into a number of VAT declarations and discovered that an input tax recovery claim had been made on the purchase of a new vehicle based on a 50% deduction of the VAT paid and a further claim for ‘depreciation’ on a previously owned vehicle.
The Tribunal Judge referred to SI 1992 (Value Added Tax (Input Tax) Order 1992) where there is a general exclusion allowing the recovery of VAT on the purchase of a qualifying motor car – which means those used exclusively for business purposes and not available for any private use.
The Judge accepted the taxpayer’s evidence that he acquired the vehicle exclusively for business purposes. The Judge was equally confident that the vehicle was nevertheless available for private use. It was not separately locked away, had not been adapted for business use and was parked on the premises where the taxpayer and his family lived.
The taxpayer’s appeal was disallowed although he was such a credible witness that the Judge allowed his subsidiary appeal against an earlier mis-declaration penalty on the grounds that he had made an honest mistake.