Claiming VAT on vehicle repairs - proportional to business use

[vwdan]

This seems like one of those questions that simply MUST be clearly answered elsewhere, but I've struggled to find anything. NB: I've not actually STARTED doing anything yet.

I've currently got a private car and I'm just wondering if it's possible to claim VAT back on repairs for it, by claiming the proportion that is attributable to business use. HMRC on VAT says the following:

You can reclaim all the VAT you're charged on repairs and maintenance to a vehicle so long as:
the vehicle is used to some extent for business purposes
the business pays for the work to be done
It doesn't matter if the car is used for private motoring or if you've decided not to reclaim the VAT on road fuel for business travel.
But you can't reclaim the VAT on vehicle repairs and maintenance if you use the vehicle only for your own private motoring.

But does this assume that the vehicle is owned by the company? I'd kind of presume so, but you can claim a percentage for decorating your home office, even though the company will never own it or, in fact, benefit from it:

If you work from home, use your study 50 per cent for business and redecorate it, you can reclaim 50 per cent of the VAT.

By the way - I'm not trying to scam anything here. I'm pretty convinced that at least 90% of the vehicle use will be business only and, to be honest, I'm genuinely considering giving it to the company and making it unavailable for ANY private use. But, from what I gather, HMRC are very suspicious of this and while I'll be whiter than white - I'd rather not have them breathing down my neck from day one.

I realise that it may be more tax efficient over the course of [x] years to simply claim the mileage - but right now I'm going for simplicity. Plus, I tend to run older cars because I can do most repairs myself.

[Martin at NixonWilliams]

This seems like one of those questions that simply MUST be clearly answered elsewhere, but I've struggled to find anything. NB: I've not actually STARTED doing anything yet.

I've currently got a private car and I'm just wondering if it's possible to claim VAT back on repairs for it, by claiming the proportion that is attributable to business use. HMRC on VAT says the following:



But does this assume that the vehicle is owned by the company? I'd kind of presume so, but you can claim a percentage for decorating your home office, even though the company will never own it or, in fact, benefit from it:



By the way - I'm not trying to scam anything here. I'm pretty convinced that at least 90% of the vehicle use will be business only and, to be honest, I'm genuinely considering giving it to the company and making it unavailable for ANY private use. But, from what I gather, HMRC are very suspicious of this and while I'll be whiter than white - I'd rather not have them breathing down my neck from day one.

I realise that it may be more tax efficient over the course of [x] years to simply claim the mileage - but right now I'm going for simplicity. Plus, I tend to run older cars because I can do most repairs myself.

It's a no unfortunately, the guidance you refer to relates to cars owned or leased by the company.

As I am sure you are aware, you can claim 45p per business mile travelled in your private vehicle for the first 10,000 miles in the tax year. This rather generous rate is designed to compensate you for costs in addition to fuel, such as insurance, repairs etc.

I hope this helps.

Martin

[northernladuk]

By the way - I'm not trying to scam anything here. I'm pretty convinced that at least 90% of the vehicle use will be business only and, to be honest, I'm genuinely considering giving it to the company and making it unavailable for ANY private use. But, from what I gather, HMRC are very suspicious of this and while I'll be whiter than white - I'd rather not have them breathing down my neck from day one.

This won't work either. The fact it is sitting your drive at home makes it available for use so falls in to duality of purpose and BiK kicks in. You have to look in to it in detail at that point. In some rare instances it can be beneficial to have a company car but in nearly all cases it isn't.

[vwdan]

It's a no unfortunately, the guidance you refer to relates to cars owned or leased by the company.

As I am sure you are aware, you can claim 45p per business mile travelled in your private vehicle for the first 10,000 miles in the tax year. This rather generous rate is designed to compensate you for costs in addition to fuel, such as insurance, repairs etc.

I hope this helps.

Martin

Thanks for that Martin - I had a feeling it would be a no (It always is - isn't it ) but couldn't find it written down in a language that I understood.

This won't work either. The fact it is sitting your drive at home makes it available for use so falls in to duality of purpose and BiK kicks in. You have to look in to it in detail at that point. In some rare instances it can be beneficial to have a company car but in nearly all cases it isn't.

I appreciate this, but I'm under the impression that if I keep detailed odometer based mileage logs, get business only insurance and formally prohibit the use in company documents then I SHOULD be able to prove business use only. But I agree that it's not straightforward and is just begging for an investigation!

[TheCyclingProgrammer]

This won't work either. The fact it is sitting your drive at home makes it available for use so falls in to duality of purpose and BiK kicks in. You have to look in to it in detail at that point. In some rare instances it can be beneficial to have a company car but in nearly all cases it isn't.

This. As the sole director of YourCo there is no practical way to make the car "unavailable" that HMRC would find acceptable or believable.

[TheCyclingProgrammer]

I appreciate this, but I'm under the impression that if I keep detailed odometer based mileage logs, get business only insurance and formally prohibit the use in company documents then I SHOULD be able to prove business use only. But I agree that it's not straightforward and is just begging for an investigation!

It doesn't matter if you only ever use the car for business use. That's not the test. The test is whether or not the car is "available for private use", not whether or not it has been used for private use. The sheer virtue of the fact that you have sole authority over who can use the car (and coupled with the fact that you have access to the car and the keys) would mean you would always be caught.

EIM23020 - Car benefit: conditions for the charge to apply

Circumstances that HMRC would normally accept as a car not being available for private use would be:

* The car cannot physically be used (i.e. it's broken down and requires repair)
* The employee (you) cannot physically gain access to the car (you do not have access to the keys nor do you have the authority to gain access to the keys).
* The above still only counts if the car is unavailable for 30 consecutive days

[Clare@InTouch]

This. As the sole director of YourCo there is no practical way to make the car "unavailable" that HMRC would find acceptable or believable.

Agreed. Having it sat on your drive and having the keys in your house makes it available, even if there isn't any actual private use. You'd have a difficult time arguing with HMRC that there should be no BIK unless you kept it at away from home with the keys locked up off site overnight, had it insured for and actually used by more than just you, and had official documents prohibiting private use. It's not impossible, I saw a case just recently that succeeded, but they had separate business premises and all of the above.

If you're thinking of a company car then look at electric cars, or ones with very low CO2. Otherwise NLUK is right, it's rarely worth it from a tax point of view.

[TheCyclingProgrammer]

You'd have a difficult time arguing with HMRC that there should be no BIK unless you kept it at away from home with the keys locked up off site overnight, had it insured for and actually used by more than just you, and had official documents prohibiting private use. It's not impossible, I saw a case just recently that succeeded, but they had separate business premises and all of the above.

Personally, I'd think in this situation that if you were the sole director you'd still have a hard to time convincing HMRC that you did not have authority to access the keys to the car - even if for arguments sake, you put third party in charge of the keys (e.g. a garage), you'd still have the authority to make them hand the keys over wouldn't you?.

Out of curiosity, couldn't you use the above logic to say that for any company with a sole director that has say, a fleet of cars (e.g. a private hire vehicle company), that the cars are strictly always available to the director for his/her own personal use because he/she could always access one of the keys and use them. Would HMRC take a pragmatic view in this case or would they apply a benefit charge?

[Clare@InTouch]

Personally, I'd think in this situation that if you were the sole director you'd still have a hard to time convincing HMRC that you did not have authority to access the keys to the car - even if for arguments sake, you put third party in charge of the keys (e.g. a garage), you'd still have the authority to make them hand the keys over wouldn't you?.

Out of curiosity, couldn't you use the above logic to say that for any company with a sole director that has say, a fleet of cars (e.g. a private hire vehicle company), that the cars are strictly always available to the director for his/her own personal use because he/she could always access one of the keys and use them. Would HMRC take a pragmatic view in this case or would they apply a benefit charge?

If you have a fleet of cars available then it's a case of proving they are pool cars. If they are, and you can prove it, then there's no BIK anyway. The problem is that a sole director who keeps the car on his driveway would have a hard time proving a car was a pool car as the conditions are quite strict:

it was made available to, and actually used by, more than one of those employees
it was made available, in the case of each of those employees, by reason of the employee's employment
it was not ordinarily used by one of those employees to the exclusion of the others
in the case of each of those employees, any private use of it made by the employee was merely incidental to the employee's other use of it in that year (see EIM23455), and
it was not normally kept overnight on or in the vicinity of any residential premises where any of the employees was residing, except while being kept overnight on premises occupied by the person making it available to them (see EIM23465).

It's worth noting the private use referred to above - a document stating private use isn't allowed won't mean the car becomes a pool car, as incidental private use is acceptable. Other factors are potentially more important.

Recent case on that subject here The Finance & Tax Tribunal The "pool car" in question was a Porsche 911

[Martin at NixonWilliams]

This brings back memories of my time working for Audi where, as a junior, I was assiting with the audit and found that there were six 'pool cars' missing from the premises! Somehow ended up in the driveways of senior managers & sale staff!