Back to Library Home Page

VAT on Company Cars

The rules for VAT on company cars depend upon whether the car is purchased or leased.

VAT on Purchased Cars

For passenger cars (other than pool cars), VAT incurred by VAT registered businesses on the purchase price of company cars cannot be recovered by the business.

The only exceptions are for;
cars bought by leasing companies to be leased to their customers; and
cars which are used as 'pool cars', broadly those used 100% for business purposes and kept at the business premises when not in use.

As a result, the depreciation costs of buying company cars outright are higher than the comparable values incorporated in the finance payments for contract hire or leasing as the VAT inclusive cost must be depreciated.

Click here for information on VAT recovery for leased cars ...