Input VAT on Leased Cars : Key Insights for Businesses

When leasing cars for business purposes, it’s important to understand the VAT implications:

1. Recovering VAT for Leasing Companies: VAT can be reclaimed if cars are leased at commercial rates. Ensure the invoice specifies if the car is ‘qualifying.’

2. Business Leasing and VAT Recovery: Typically, businesses can recover 50% of VAT on leased cars used for both personal and business use. Full VAT recovery applies if the vehicle is solely for business purposes, like taxis or driving instruction.

3. Self-Drive Hire and the 50% Block: For short-term hires (less than 10 days), if no company car exists, the 50% VAT block may not apply. But for replacement cars, the block applies from day one.

4. Optional Services and Mileage Charges: The 50% block affects the VAT on leasing charges, including optional services and excess mileage fees, unless they are separately invoiced.

5. Early Lease Termination: The 50% VAT block also applies if you terminate a lease early and incur termination fees.

Understanding these rules can help businesses manage VAT on leased cars more effectively, optimizing their tax recovery process. For detailed guidance please contact us on 01226 245824 Or email davideb@deb-accountants.co.uk