When is a car a van for VAT reclaim purposes?
In most cases a business is 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, a load area which is unsuitable for carrying passengers and opaque rear windows. However, there are a significant number of new vehicles where these distinctions are more difficult to make – is a vehicle a car or a van?
HMRC’s VAT input tax manual sets out some of the important characteristics that help define what is a car derived van? Historically, HMRC has publish a list of car-derived and combi vans on which VAT may be deducted (subject to the normal rules) as they are not considered as cars for VAT purposes. The list is still available on GOV.UK but has not been updated since May 2015.
Where a ‘van’ is not listed by HMRC, we would recommend that the technical criteria is reviewed to ascertain whether the vehicle could be classified as a van for VAT purposes. The VAT recovery position might well encourage the purchase of one make / model of van over another. We would be happy to help you review any impending or recent purchases where there is doubt as to the recovery of VAT input tax.