Motoring expenses: car repairs and other motoring expenses
Repairs and maintenance
If a business uses a vehicle for business purposes it can reclaim the VAT it is charged on repairs and maintenance as input tax as long as the business paid for the work. The business should do this after applying any relevant partial exemption restriction.
It does not matter if:
- the vehicle is also used for private motoring; or
- the business has chosen not to reclaim VAT on road fuel.
In the case of a sole proprietor or partnership VAT on repairs and maintenance cannot be reclaimed if the vehicle is solely used for private purposes.
See VIT13500 for more on car repairs made under insurance claims.
Input tax cannot be claimed on any optional extras or accessories that are fitted at the time of purchase to a car that is subject to the input tax block. This applies even if the car dealer itemises them on a sales invoice or invoices for them separately. This is because the accessories form part of the single supply of a car which is subject to the block.
Some accessories or modifications may be fitted or carried out after the vehicle has been purchased by the business. Any VAT charged is not input tax unless the purchase passes the business purpose test (see VIT10200). For example, a satellite navigation system bought for a car used by an employee who is a travelling salesman would pass the test.
HMRC will consider whether the accessory or modification was carried out primarily for personal indulgence rather than for business purposes. We may disallow any input tax claimed if the business cannot show a genuine business purpose. Typical examples where HMRC might disallow a claim may include:
- the purchase of an expensive in car entertainment system;
- an engine conversion to enhance the vehicles performance; and
- personalised number plates.
Use of a radio would be accepted as having a business purpose. However, the amount of input tax claimed may be seen to be out of step with that objective alone. Anyone buying a radio may appear to have a substantial personal, or at least not strictly business, motivation behind their purchase. A straightforward apportionment based on an agreed ratio of business to private use of the goods would be appropriate.
In the case of engine conversion it would be necessary to consider whether there was any business purpose or benefit in this purchase at all. An increase in top speed or faster acceleration is unlikely to assist in the operation of the business. The VAT incurred would not qualify as input tax as the business purpose test would not be satisfied. See Trade Development Associates at VIT64680.
Personalised number plates would generally be viewed to be purchased for private reasons. However, there may be times when the business purpose test may be passed. We will consider each case on its merits. Please refer to Ava Knit Ltd and BJ Kershaw Transport Ltd at VIT64680.
If a business appeals against an assessment to deny recovery of input tax on car accessories HMRC will consider the provisions of VATA1994 Section 84(4)(c).
Other motoring charges
VAT incurred on other business motoring expenses such as fleet management charges or parking charges is input tax. It is recoverable subject to the normal business use and partial exemption rules.