Need a supportive Accountant?


Tax planning advice for when buying your new business cars.

Having tax planning advice before acquiring new business cars is important.

When cars are bought in the UK, VAt will be applicable to the car.

Even when the business owner is VAT registered, they are unable to claim VAT from the revenue.

Having savings on Vat is important because the cost of VAT on company cars is very huge, the VAT on company cars represents one-fifth of the cost of the car.

When a business buy company cars that are used mainly for business, at times they are usually not the cheapest new cars, this might be for several reasons known to the company, but cars are still necessary for our business.

Vat on company cars is usually charged at 20% on the car value whether the vehicle is leased or bought.

For example, The car value of an Audi A3 is  £20,000( vat exclusive). When the vat is added, the total cost would be £24,000.

This means the input vat you could reclaim on this new business car is £4000. This £4000 can be reclaimed when the next VAT return is submitted.

In this article, I will be discussing tax planning advice that can be put in place to ensure that when you buy your brand new car, you would be able to reclaim  VAT on business cars that are used mainly for business and this would reduce the cost of the car to your business


1. Advice on the use of the new car

The business owners should ensure that the cars bought has only one purpose, which is only for business. The management should ensure that the cars must not be used privately.

To ensure that your staff uses this car just for business only.  The company can include in their contract, clauses that prohibit them from using the car for private use.


  2. Advice on the  business car insurance

When the business company cars are bought, business car insurance on them must be solely for business, By doing this you are making it impossible for the new car to be used for private use.

Also, this could serve as proof to HMRC that the cars are used solely for business.




      3. Advice on the mileage sheet or tracker

The company must keep a mileage log on these cars to show the business journeys made. Each driver must have their individual mileage logs to ensure proper record keeping

The management must ensure that they keep proper and regular checks on these mileage sheets and trackers.

Alternatively, you can attach a mileage tracker to these cars to have a more accurate record.

When a business has a mileage tracker, it will serve as proof to the HMRC.



      4. Advice on where to park the business car.

After acquiring these cars, they must be parked on business premises by the end of the business day.

The directors might be tempted in parking the cars in their houses, however, they must never be parked overnight in the house of the directors or employees.

These savings can be increased by the number of new business cars that you would have to buy.



       By taking on the steps and advice stated above

When all this advice have be taken, the business owner can reclaim vat on new cars.

The effect of putting all this advice in place will enable the business owners to have a lot of savings from VAt from their cars.

For further advice,  we could provide you advice that is bespoke to your business and saves you tax on vat on your cars.