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For VAT purposes it's important to know 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.
This guide explains the difference between a car, motorcycle, a motor home and a commercial vehicle for VAT purposes.
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In most cases, VAT-registered businesses can't reclaim the VAT when they buy a car.
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:
In addition, the following are not cars for VAT purposes:
Because motorcycles only have two wheels they're not cars for VAT purposes.
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. But there are some vehicles where it's harder to be sure whether they're a car or a commercial vehicle. These vehicles are car-derived vans and vans with rear seats - combination vans, or combi vans.
Car derived vans are based on cars and 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 The rear side windows will have been replaced by opaque panels.
HM Revenue & Customs (HMRC) considers that a car derived van is a commercial vehicle if it meets all three of the following conditions:
If it meets these conditions then it's a commercial vehicle and you can reclaim the input VAT.
Some vehicles look like vans and don't have windows in the sides behind the driver. But they do have additional seats for carrying passengers behind the front row of seats (or they're designed so they can be fitted with them). They're sometimes known as combination vans or combi vans.
HMRC considers that this type of vehicle is a commercial vehicle for VAT purposes if it meets either of the following conditions:
If it meets either of these conditions then the vehicle is a commercial vehicle for VAT purposes and you can reclaim the input VAT if you follow the normal rules for reclaiming VAT.
HMRC has produced a list of car derived vans and vans with rear seats showing whether they're classed as a van (commercial vehicle) or a car for VAT purposes. Remember that vehicle specifications change so the list may not be up to date. If you're in any doubt you can contact HMRC for guidance.
Motor homes and motor caravans aren't considered to be cars for VAT purposes so long as certain features have been incorporated into the vehicle. These are:
These features have been agreed between HMRC and the Society of Motor Manufacturers and Traders.