If you leases a car, you can usually only claim 50% of the VAT.  Although you may be able to reclaim all of the VAT if the car is used only * for business and is not available for private use, see some examples below.

  • will be used exclusively for the purposes of the business and is not available for any private use; or
  • is intended to be used primarily as a taxi, driving-instruction car or self-drive, that is daily rental, car.

* Exclusively for business use

To qualify as being available exclusively for business use, a car must be used only for business journeys and not ‘made available’ for the private use of anyone, including employees.

The phrase ‘made available’ has been given a very broad meaning by HMRC, and so a car is available for private use if there is nothing preventing its private use by anyone, including employees, which means that if HMRC were to look into these transactions then if 100% of the VAT has been reclaimed and they feel that your client does not meet the criteria the VAT will need to be repaid.