Do you lease a car through your Company?
VAT implications For Company Car Leasing:
Here Is A Full Guide for your Business.
When you lease a company car through your business, we often get asked about the VAT implications, and what portion of the VAT can you claim against.
Firstly, when leasing a car for business purposes the business will normally be unable to recover 50% of the VAT charged on the leasing invoices.
HMRC refers to this as the 50% block and this reduction is to cover private use of the car which HMRC presumes will occur.
The input VAT restriction applies to any business providing a leased car to a company employee or a director for a period of more than 10 days.
However, there are some exceptions.
If any of the following apply, then you may be able to recover 100% of the input VAT on the lease charges:
- Short hires not exceeding 10 days where the car is required for a specific business trip. If the short hire is to replace a company vehicle which is off the road then the 50% block would apply.
- Valid pool cars - These are cars that are kept at the business premises and never overnight at a private home or allocated to a single employee. Any private use is incidental, eg making a stop to buy lunch
- Cars leased exclusively for business purposes - eg where it is used for hire with a driver to carry passengers (taxi) or for providing driving instruction.
What about maintenance costs?
The 50% input tax block applies to the lease element of the contract only. Maintenance charges that are supplied separately and identified separately on invoice are deemed a business expense and as such 100% of the input tax charged on maintenance charges can be reclaimed.
What if I'm leasing a van?
Vans are deemed to be commercial vehicles where any private use is likely to be incidental to its intended commercial use. As such vans are not included in these restrictions.
If you have any more questions about VAT implications when leasing a company car, or any other queries regarding your businesses finance, get in touch for a free consultation and see how we can help you.
