Motor running costs
10/06/2019

When it comes to purchasing a car, instances where HMRC will accept that your car is used 100% for your business are few & far between. No apportionment of VAT between business and private use is permitted so no VAT whatsoever can be claimed.

However, this block by HMRC does not extend to motor running expenses (repairs & servicing costs) and indeed with these, they seem to go out of their way to appear generous.

Even with significant private use of a vehicle HMRC will allow you to reclaim 100% of the VAT and not just relating to cars owned by your business but also to those owned by employees who incur business mileage.

For example; an employer (whether a limited company, partnership or sole trader) can pay for the servicing costs of each relevant car and, in order to avoid a benefit-in-kind issue, deduct the payment from the employee’s mileage allowance (net of the element relating to fuel). The employer can then reclaim all the VAT on those service bills. Bear in mind that for employees (including directors) the value of the servicing costs must not exceed their mileage allowance entitlement (less fuel element) otherwise income tax and NICs will apply.

Example:

Based on 3,000 miles in a year @.45p less fuel @ .11p; £1,350 - £330 = £1,020 allowable service costs without any PAYE implications

Ideally the invoices should be addressed to the business but this is not vital and will not preclude you from reclaiming the VAT charged.

Please note that for journey-related expenses, such as off-road parking, tolls etc, rather than motor running costs, follow normal VAT rules.


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Maple House
5 The Maples
Cleeve
Bristol
BS49 4FS
info@astrum.accountantsTel: 01275 277369 | 01934 235007 | 0117 2140369 

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