VAT qualifying cars

A VAT qualifying car is one where the VAT has never been permanently absorbed. Typically that means an ex-demonstrator, an ex-lease or ex-hire car, or a car that has been exported and reimported. The invoice shows the VAT separately, and a buyer who is entitled to reclaim it can do so.

Most used cars are the opposite: VAT margin cars. The VAT is buried in the price, cannot be shown separately, and cannot be reclaimed by anyone. Neither is better than the other. It only matters if you are in a position to recover the tax.

Whether you can recover the VAT is a question for your accountant, not for us. HMRC is strict about cars in particular: recovery normally requires that the car is used exclusively for business, with no private use at all, which is a high bar for an ordinary company car.

In practice the buyers who benefit are usually leasing companies, driving schools, taxi and private hire operators, dealers buying for resale, and businesses exporting the car out of the UK.

When you brief us, tell us at the outset that you want a VAT qualifying car. It narrows the search considerably, and there is no point finding the right specification in the wrong tax status.

We will not guess. If a car's status is unclear from the paperwork we say so rather than assuming, because getting it wrong costs you the reclaim and costs us the relationship.