18/05/2026
Think you can reclaim all of the VAT on a leased car? Not always 👀
A lot of businesses are surprised to learn that HMRC usually only allows 50% of the VAT on car lease payments to be reclaimed. This is because there is assumed to be an element of private use, even if the car is mainly used for business.
There are some exceptions though 👇
✔️ Taxis
✔️ Driving instruction vehicles
�These can usually reclaim 100% of the VAT, as they are treated as wholly business use.
Short term hire cars can catch people out too. The 50% restriction can still apply, even on temporary replacement vehicles. However, if the hire is for 10 days or less and used entirely for business, the restriction will not usually apply.
This is one of those VAT rules that is easy to miss, especially with ad hoc vehicle hire or lease agreements.
Getting it wrong could mean reclaiming too much VAT and causing problems later down the line ⚠️
If you are unsure what VAT you can reclaim on vehicle costs, get in touch with us before submitting your next VAT return 📩
