Expert Opinion: VAT – When a car is not a car

For VAT purposes, it’s important to know when a car is not a car – the difference between cars and other vehicles. This is because in most cases, VAT-registered businesses can’t reclaim the VAT when they buy a car. But they may be able to reclaim the VAT when they buy a commercial vehicle, motorcycle or motor home.

Sarah Harkness from IN Accountancy explains:

VAT rules say that a car is any motor vehicle of a kind normally used on public roads. It must have three or more wheels and meet one of the following conditions:

• It must be constructed – or adapted – mainly for carrying passengers;
• It must have roofed accommodation behind the driver’s seat. This must either be fitted with side windows already or be constructed – or adapted – so that side windows can be fitted

In addition, the following are not cars for VAT purposes:

• vehicles capable of accommodating only one person or suitable for carrying twelve or more people including the driver;
• caravans, ambulances and prison vans;
• vehicles of three tonnes or more unladen weight;
• special purpose vehicles, such as ice cream vans, mobile shops, hearses, bullion vans, and breakdown and recovery vehicles;
• vehicles with a payload of one tonne or more;
• motorcycles, because they only have two wheels.

VAT-registered businesses can generally reclaim the VAT when they buy a commercial vehicle. Any vehicle is a commercial vehicle if it has a payload of one tonne or more, or an unladen weight of three tonnes. In addition, it’s normally easy to tell the difference between a car and a commercial vehicle like a van, lorry or tractor.

There are some vehicles where it’s harder to be sure whether they’re a car or a commercial vehicle. These are car derived vans based on cars – combination or combi-vans that look similar to cars on the outside. But either the manufacturer or a vehicle converter has altered the inside of the vehicle so that it’s sold as a commercial vehicle. For example the rear seats and seat belts will have been taken out and a new floor panel will have been fitted in the back to make a load area. The rear side windows will have been replaced by opaque panels.

Read more at IN Accountancy

Image courtesy of Photo by Mike Bird from Pexels