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The VAT recovery position for the purchase or lease, of electric, diesel or petrol fuelled vehicles is the same.

VAT incurred on the purchase of a car is only recoverable in the following limited circumstances:-

• The car will be used exclusively for a business purpose i.e. only for business journeys (travelling from home to work is not a business journey) and the vehicle is not available for private use of employees or anyone else. HMRC consider that a car is available for private use “when there is nothing preventing you or an employee from using the car for private use” there is significant case law on the matter
• The vehicle is a taxi, driving instruction car or self-drive hire car
• Where the car is stock in the trade of a motor manufacturer or dealer

On a leased vehicle 50% of the VAT on the leasing charge is irrecoverable; this covers private use of the vehicle. All of the VAT can be claimed if the car is only for business and is not available for private use, or if the vehicle is a taxi, driving instruction car or self-drive hire car.

Further details on the above points can be found in Section 3 of VAT Notice 700/64 Motoring Expenses