Recovery of VAT on company cars

The First Tier Tribunal has ruled in the case Zone Contractors Ltd (TC05330) that VAT on the purchase price of cars may be recovered by a business, where the employees’ employment contract specifies that no private use of company vehicles is allowed.

This contrasts HMRC’s and previous tribunal’s stance that if the employee’s motor insurance allows for private use of company vehicles, then VAT recovery was not allowed.

It may be worth looking at this both retrospectively and prospectively.

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