Beta This part of GOV.UK is being rebuilt – find out what this means

HMRC internal manual

VAT Input Tax

From
HM Revenue & Customs
Updated
, see all updates

Motoring expenses: short-term hire and Motability leases

Short-term hire

A 10 day concession has been agreed with the British Vehicle Rental and Leasing Association (BVRLA). Under this the 50% input tax restriction is not applied to a business hire of 10 days or fewer.

HMRC will apply this administrative concession strictly. Each hiring must be treated separately. Businesses are not allowed to adopt an aggregate method such as the average rental period per quarter.

HMRC staff will look into any apparent abuse of the concession. They should report any abnormal incidence or pattern of short-term hire to the Motor Trade VAT Unit of Expertise.

For the purpose of the 50% input tax restriction, use in the evenings or at the weekend during a hire of 0 to 10 days should be ignored if the car was hired to make a specific business trip. The 50% input tax restriction will apply if the car was hired simply to replace an off-road company car.

For hiring over 10 days the normal test for wholly business purpose will apply.

Motability leases

Motability is an organisation that leases cars to disabled people. For more information please see TIP 19: Car Retailers - New and Second-hand Vehicles. Please also refer to section 10 of Notice 701/59, Motor vehicles for disabled people.

Unlike other vehicle leasing companies Motability can zero rate their leases under VAT Act 1994 Schedule 8, Group 12, Item 14 as long as all the conditions set out in that item are met.

At the end of the three year lease period Motability sell the cars. This sale can also be zero rated under Item 15 of Group 12.

(This content has been withheld because of exemptions in the Freedom of Information Act 2000) VATMARG The margin schemes(This content has been withheld because of exemptions in the Freedom of Information Act 2000)