2. Vehicles and fuel costs

Buying a new car

You may be able to reclaim all the VAT on a new car if you use it only for business.

The car must not be available for private use, and you must be able to show that it isn’t, eg it’s specified in your employee’s contract.

‘Private use’ includes travelling between home and work, unless it’s a temporary place of work.

You may also be able to claim all the VAT on a new car if it’s mainly used:

  • as a taxi
  • for driving instruction 

  • for self-drive hire

Leasing a car

If you lease a car, you can usually claim 50% of the VAT. You may be able to reclaim all the VAT if the car is used only for business and is not available for private use, or is mainly used:

  • as a taxi
  • for driving instruction 


Self-drive hire cars

If you hire a car to replace a company car that’s off the road, you can usually claim 50% of the VAT on the hire charge.

If you hire a car for another reason (eg you don’t have a company car), you can reclaim all the VAT if all the following apply:

  • you hire it for no more than 10 days
  • it’s used only for business
  • it’s not available for private use

Commercial vehicles

You can usually reclaim the VAT for buying a commercial vehicle (like a van, lorry or tractor) if you only use it for business.

If they’re used only for business, you can also reclaim VAT on:

Fuel costs

There are different ways of reclaiming VAT on fuel, if you don’t pay a fixed rate under the Flat Rate Scheme.

You can reclaim all the VAT on fuel if your vehicle is used only for business. There are 3 ways of handling VAT if you use the vehicle for both business and private purposes. You can: 


  • reclaim all the VAT and pay the right fuel scale charge for your vehicle
  • only reclaim the VAT on fuel you use for business trips - you’ll have to keep detailed mileage records
  • choose not to reclaim any VAT, eg if your business mileage is so low that the fuel scale charge would be higher than the VAT you can reclaim

If you choose not to reclaim VAT on fuel for one vehicle you can’t reclaim VAT on any fuel for vehicles used by your business.

Additional costs

You can usually reclaim the VAT for:

  • all business-related running and maintenance costs, eg repairs or off-street parking
  • any accessories you’ve fitted for business use

You can do this even if you can’t reclaim VAT on the vehicle itself.

Used vehicles

The sales invoice for your used vehicle must show the VAT. You can’t reclaim if it doesn’t, eg if the seller uses the VAT margin scheme.