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HMRC internal manual

VAT Input Tax

HM Revenue & Customs
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Legal history: cases about motoring expenses

Please note that the following material is not a full summary of the case - it merely highlights the principle referred to in the appropriate section of this manual.

Ava Knit Ltd VTD 1461

A company had its claim to input tax on the cost of a personalised numberplate disallowed. The numberplate reflected the name of the director and not the company’s name. The tribunal held that the numberplate was bought for the personal pleasure of the director, not the purposes of the company’s business.

BJ Kershaw Transport Ltd VTD 1785

A company that was named after its controlling director bought a numberplate that reflected their initials. The tribunal found that the relationship between the numberplate and the company was weak. Therefore, the numberplate could not reasonably be expected to promote the company. Input tax could not be recovered on the cost of the numberplate.

Tamburello Ltd VTD 14305

The company bought three cars for leasing. One car was leased to an associated company. The other two cars were leased to a company as a result of a personal friendship between the directors of the two firms. All the cars were leased for less than a commercial value.

The tribunal held that input tax could be claimed on the purchase of the cars. Although the rental payments were below what would be expected in an arms-length commercial transaction, the company had also received interest-free loans from the lessees. Looking at the situation as a whole the company would get a reasonable commercial rate of return for taking part in the transaction.

Trade Development Associates VTD 12699

A management consultancy business upgraded the engine of a car to allow it to achieve a top speed of 175 mph. The tribunal held that input tax on the cost of upgrading the engine was not deductible.

The tribunal also held that there was no direct association between the business of a management consultancy and upgrading, rather than repairing, an engine simply to allow the achievement of driving speeds way in excess of the speed limit. Therefore the cost of upgrading the engine was not for the purposes of the business.