Buying and selling a car

Produced by Tolley

The following Value Added Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Buying and selling a car
  • What is a car?
  • Exceptions
  • Commercial vehicles that were cars
  • Combination vans
  • Can input tax be recovered on the purchase, import or acquisition of a car?
  • Pool cars
  • Other items where input tax cannot be recovered
  • Fleet buyer bonuses, dealer demonstration bonuses and fleet leasing bonuses
  • Cars purchased for sale and lease back
  • More...

Buying and selling a car

This guidance note covers the VAT treatment of the purchase or lease of a motor car and provides an overview of when VAT can be recovered in respect of cars used for business purposes.

What is a car?

From a VAT perspective, a car is deemed to be a motor vehicle of any description that meets the following conditions:

  1. capable of being driven on public roads

  2. has three or more wheels

  3. is constructed or adapted to mainly carrying passengers

  4. has to the rear of the driver’s seat roofed accommodation which is fitted with side windows or is adapted and capable of having side windows fitted

SI 1992/3222, Articles 2, 7; VIT50000; HMRC Notice 700/64; De Voil Indirect Tax Service V1.293, V3.443; 2006/112/EC, Article 176


The following are not treated as cars for the purposes of these provisions:

  1. vehicles that can only accommodate one person

  2. vehicles that are suitable for carrying more than 12 people including the driver and which meet the requirements of Road Vehicles (Construction of Use) Regulations 1986, Sch 6 (road safety regulations)

  3. caravans

  4. ambulances

  5. prison vans

  6. vehicles of not less than three tonnes (unladen weight) as defined in Road Vehicles (Construction of Use) Regulations 1986

  7. vehicles constructed to carry a ‘payload’ of one tonne or more. ‘Payload’ is the difference between a vehicle’s kerb weight and its maximum gross weight, both terms as defined in Road Vehicles (Construction of Use) Regulations 1986. This change means that certain dual purpose vehicles, commonly called twin cab or double cab pick-ups, are no longer cars for VAT purposes. A few double cabs carry a payload of under one tonne. Customs Centre of Operational Expertise for the Motor Trade (COPE) maintains a schedule of double cab pick-up vehicles and their ex-works payloads. Agreement has been reached with the Society of Motor Manufacturers and Traders about the treatment of optional accessories which dealers or others may add to a double cab potentially converting it into a

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