The following Value Added Tax guidance note by Tolley provides comprehensive and up to date tax information covering:
This guidance note provides an overview of what VAT can be recovered on the lease of a car. Please see the Buying and selling a car guidance note for information on buying and selling a car.
A leasing company can recover all of the VAT incurred on the purchase of a car providing that they will lease the cars at a commercial rate to the lessor. The leasing company is required to state the following on the leasing invoice:
If a business uses the car for solely business purposes, such as a taxi, driving school, etc they can recover all of the VAT incurred on the lease of the car.
A business that leases a qualifying car that is available for private use is only entitled to recover 50% of the VAT incurred on the leasing cost. The other 50% of the VAT incurred is blocked from VAT recovery. The 50% block applies to all charges levied in respect of the lease of the car, including the following:
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