Guide to VAT on Motoring Expenses: What UK Businesses Need to Know and Claim Correctly

Managing finances can be tricky—especially when it comes to value-added tax (VAT) on business expenses like motoring costs. If you’ve ever wondered whether you can reclaim VAT on your journeys, petrol bills, parking, or even leasing a company car, you’re in the right place.

In this blog, we’ll break it all down in simple, everyday language, so you know exactly what you can claim, what you can’t, and how to avoid those common VAT pitfalls.

What Is VAT on Motoring Expenses?

Let’s start with the basics.

If you run a business that uses cars, vans, or motorbikes—whether for deliveries, visiting clients, or any kind of business-related travel—you may be eligible to reclaim VAT on those vehicle-related expenses. But, and this is a big “but”—not all motoring expenses qualify, and even those that do often come with specific rules.

Think of it like this: you can’t claim VAT just because a car is used. It depends on how it’s used and who is using it.

Types of Motoring Expenses You May Incur

Vehicles have ongoing costs. Here are some of the most common ones that businesses face:

• Fuel (petrol, diesel, electricity)
• Maintenance and repairs
• Leasing or hiring vehicles
• Vehicle purchases
• Insurance
• Parking and tolls
• Accessories and modifications

Now, let’s walk through each of these to understand what VAT can—and can’t—be claimed.

1. VAT on Fuel

Fuel expenses are often one of the biggest areas of confusion. Can you reclaim VAT on petrol or diesel?

Yes, you can—but only under certain conditions.

Here are your options:

• Claim the actual VAT on fuel: This means keeping accurate mileage and receipts. But, the fuel must be used 100% for business purposes.
• Use the fuel scale charge: If the fuel is used for both business and private purposes (like commuting), you can still claim VAT, but you’ll also need to pay something back—this is the VAT road fuel scale charge. Think of it as a flat rate to account for private use.

A practical tip: If you run a small business or you’re self-employed and only occasionally use your car for work, the scale charge route could be simpler.

2. VAT on Maintenance and Repairs

Good news here—VAT can be fully reclaimed on repairs and maintenance of company vehicles, even if those vehicles are used for private journeys as well.

However, the key is that the cost must be charged to the business. If your employee takes the car to the garage and pays themselves without claiming it back via the business, you can’t reclaim VAT.

What counts as maintenance?

Think tyres, oil changes, MOTs, or fixing that annoying rattle.

3. Claiming VAT on Vehicle Leasing

Leasing a car? VAT rules are a little more complex here.

You can reclaim 50% of the VAT charged on the lease payments—even if the car is used personally. This is because HMRC assumes every leased car has some degree of private usage.

If the car is strictly for business—like a delivery van—you may be able to reclaim 100% of the VAT, provided there’s no personal use.

What about short-term hires or rental vehicles? Similar rules apply. But again, you need clear evidence that the use was for business only.

4. Buying a Vehicle? Read This Before Claiming VAT

Here’s where most mistakes happen.

VAT on vehicle purchases can only be reclaimed if the car is used purely for business. And that’s extremely rare.

Let’s look at an example:

Say you buy a car and use it to visit clients, but you also drive it to the supermarket on weekends. That counts as mixed-use. In this case—no VAT can be reclaimed on the purchase.

Where 100% business use could apply:

• A pool car kept at the office and available to employees, with no private use allowed
• A taxi or driving school vehicle

If you’re buying a van, you’re in luck. Vans are treated differently. You can usually claim VAT on commercial vehicles, regardless of the driver’s personal use, as long as it’s primarily employed for work.

5. What About Insurance, Parking, and Tolls?

Let’s tackle these briefly:

• Insurance: VAT on insurance premiums can’t be reclaimed. Insurance is exempt from VAT.
• Parking: You can reclaim VAT on business-related parking charges—but not fines or penalties!
• Congestion charges & tolls: These usually don’t include VAT, but if there’s any shown on the invoice, you may be able to reclaim it for business travel.

6. Employee Travel Expenses: What If Staff Use Their Own Vehicle?

If your employee uses their own vehicle for work and you reimburse them mileage, you can’t claim VAT on the whole amount. However, you can reclaim the VAT portion of the fuel cost—but only if:

• You pay them the approved mileage rate
• You get proper VAT fuel receipts

Still with me? Good. Because this is where record-keeping becomes really important.

7. The Golden Rule: Keep Clear Records

Want to stay on the good side of HMRC? Get your paperwork in order.

You need to keep:

• VAT invoices or receipts for every claim
• Mileage logs if you’re claiming business fuel
• Proof that a vehicle is used 100% for business, if applicable

If you’re ever audited—and yes, it happens!—these documents are your safety net.

Quick Tips for Getting Your Claims Right

• Double-check how vehicles are used. The more evidence, the better.
• Use accounting software that helps track expense categories and uploads receipts.
• Don’t assume all motoring costs include VAT—always look at the receipt or ask.
• Review the fuel scale charge tables each year. They’re updated annually.

Is It Worth Hiring an Accountant?

Honestly—yes, especially if vehicle expenses make up a big chunk of your business costs.

An experienced accountant can guide you on:

• Whether your use qualifies as 100% business
• Choosing between claiming actual VAT vs using scale charges
• What documentation you need to keep safe

Think of them like your financial sat-nav. They don’t just tell you the direction—they help you avoid costly detours.

Final Thoughts: Simplify, Then Reclaim

VAT on motoring expenses doesn’t have to be complicated. Once you understand the principles and follow the rules, it gets easier.

Ask yourself:

• Was this expense related to business travel?
• Can I prove it wasn’t for personal use?
• Do I have a proper VAT receipt or invoice?

Answer “yes” to all of these? Then you’re probably safe to claim.

Want to dive deeper into the official guidance? You’ll find all the details here:
https://www.gov.uk/guidance/vat-on-motoring-expenses-notice-70064

Stay compliant, save money, and fuel up your understanding—that’s smart business right there.