Claiming VAT for Private use

The response to the question whether a sole trader can claim VAT on a car purchase was no, unless the purchaser is a taxi driver, driving instructor or the person re-hired the car to a third person.

Court of Appeal, has long prevented sole traders from claiming VAT. But now a certain case has come to light giving a different dimension to the situation.

A person insured her new Land Rover Freelander for business use only. Thus private use would be illegal. The Tribunal held that the car was unavailable for private use, so input tax was deductible.

The First Tier Tribunal announced that later on there might be the option that the trader might alter the insurance to cover the private use. However, for the first time she had registered for business use only. Further, following a previous HMRC inspection, when input tax was disallowed, the taxpayer had sought guidance from HMRC. They said; for purchase VAT to be recoverable, the vehicle should be used exclusively for business purposes, should be registered and kept at the business address when not being so used, and should be insured solely for business use.

Therefore the Tribunal was entitled to be satisfied caused by the trader’s intention, at the time of the purchase, to make it unavailable for private use.

For advise on VAT, bookkeeping, year-end accounts or tax returns, contact KVS Accountants surviving small businesses in Battersea, Earls Court, Kensington, East Sheen and Chelsea.