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HMRC internal manual

VAT Input Tax

Motoring expenses: rules about motoring expenses

This part of the manual talks about the VAT law that lets you deduct input tax on motoring expenses. It also tells you when input tax cannot be claimed.

Since VAT came in there has been an input tax block on cars. This acts as a proxy for the taxation of private use. The block restricts the right to claim input tax. If it was not there the business would have to pay output tax on any private use of the car.

The block originally applied to all cars. However, there are now times where input tax on the purchase of motor cars can be claimed.

This section of the manual also describes when output tax is due as a result of the private or non-business use of:

  • a car;
  • road fuel; or
  • the conversion of a vehicle into a “car” for VAT purposes.

As well as the main body of VAT law the following either relate to, or in the case of section 84 (4)(c) of the Value Added Tax Act, can be applied to, motoring expenses:

  1. The Value Added Tax Act 1994 - sections 56 and 57;
  2. The Value Added Tax (Input Tax) Order, Statutory Instrument 1992/3222; and the Value Added Tax (Input Tax) (Amendment) Order 1999.
  3. The Value Added Tax (Cars) Order, Statutory Instrument 1992/3122;
  4. The Value Added Tax Act 1994 section 84 (4)(c);
  5. The Value Added Tax (Treatment of Transactions) Order 1992, Statutory Instrument 1992/630.
  6. The Value Added Tax (Input Tax) (Reimbursement by Employers of Employees’ Business Use of Road Fuel) Regulations 2005, Statutory Instrument 2005/3290
  7. The Value Added Tax (Supply of Services) Order 1993, Statutory Instrument 1993/1507
  8. The Value Added Tax (Consideration for Fuel Provided for Private Use) Order 2010 (which amends VAT Act 1994, section 57), Statutory Instrument 2010/919
  9. Road Vehicles (Construction and Use) Regulations 1986