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HMRC internal manual

VAT Government and Public Bodies

Section 33 bodies: cars: leasing

The VAT (Input Tax) Order 1992 (SI 1992/3222) allows taxpayers to deduct 50% of the VAT incurred on leased car expenditure. The 50% restriction is a simplification measure and is a proxy for private use. So 50% of the VAT incurred can be recovered even in circumstances where a car is used for private purposes.

If a car is hired simply to replace an ordinary official business car that is off the road the 50% block will apply from the first day of hire. But in other cases, for example where the body does not have an official business car, the 50% block will not apply where a car is hired for no more than 10 days and is to be used specifically for official business.