VAT – is it a car a van or a motor home?
It is important that businesses are aware of the correct VAT treatment of cars and other vehicles. A business is in most cases unable to reclaim the VAT charged when they purchase a car. However, there are different rules for other types of commercial vehicles and in most cases VAT can be reclaimed when a business purchases a commercial vehicle. For example, vans usually have no rear seats, metal side panels to the rear of the front seats and a load area which is unsuitable for carrying passengers.
Unfortunately, there are a growing number of new vehicles which make it difficult to distinguish a car from a van. HMRC’s guidance draws attention to this fact and reminds VAT registered businesses that HMRC publish a list of car-derived and combi vans on which VAT may be deducted (subject to the normal rules) as they are not classified as cars for VAT purposes. If a ‘van’ is not listed then it is the purchaser’s responsibility to obtain confirmation in writing from the supplier that the vehicle meets the technical criteria to be considered a van for VAT purposes.
Motor homes and motor caravans are not considered cars for VAT purposes as long as certain features such as a sink and bed are installed. Interestingly, HMRC’s guidance also confirms that because motorcycles only have two wheels they are not cars for VAT purposes.