If you are looking to buy a vehicle for your business the VAT treatment is very different depending on whether you are buying a car or a van and can add up to thousands of pounds difference in tax.
So firstly here are the key differences in treatment:
Input VAT cannot be claimed on a car purchase
If you buy a car for your business you are not permitted to reclaim the VAT charged on the purchase. However, you are permitted to claim back the VAT cost if you are buying a commercial vehicle or a van.
This difference alone can add up thousands of pounds in VAT
VAT fuel scale charge does not apply to a van
A VAT fuel scale charge applies when a VAT registered business purchases fuel for business use but there is also an element of private personal usage.
The fuel scale charge adds back a fixed amount per quarter to account for the private use. The amount charged is calculated based on the car’s CO2 emissions and is added back to the output VAT.
The VAT fuel scale charge importantly is not applicable to Vans’.
As you can see the tax treatment is much more beneficial for vans.
As a result of this if you are looking to buy a vehicle for your business you can see there are clear benefits to purchasing a van compared to a car. Which is why you need to be very careful that the vehicle you purchase does meet the definition of a van.
For VAT purposes a van deemed to be a vehicle 3 or more wheels which is not a car.
The following is deemed not to be a car:
-Commercial vehicles – designed for carrying goods with a payload of at least 1 tonne
-Vehicles which weight more than 3 tonnes
-Buses, ambulances, hearses, breakdown vehicles, ice cream vans, caravans
-Vehicles which are capable of only carrying 1 person (the driver, or that carry more than 12 people.
Pick up Trucks
Some people who are looking to get a car for the business go out and purchase a pick-up truck (such as a Toyota Hilux) as they believe that this may be classed as a van.
If you are interested in doing this then be very careful that it meets the definition above. The key point to look out for is that it has a payload of over 1 tonne. Some pick-up trucks do not in fact meet this requirement and as a result are deemed to be a car.
To be on the safe side HMRC has published a list of vehicles which state whether they are a van or car. Before purchasing a vehicle we suggest that you check this list first.