Guide to VAT on Motoring Expenses: What Businesses Need to Know to Stay Compliant

If you run a business in the UK, chances are you deal with vehicles—whether it’s a whole fleet of company cars or just the occasional taxi ride to a client meeting. But when it comes to claiming back VAT on motoring expenses, things get a little… well, confusing. 🌀

Don’t worry. We’re here to make it simple. In this guide, we’ll walk you through what the UK government says about VAT on motoring expenses, so you know what you can and can’t claim. By the end, you’ll feel more confident about keeping your VAT records straight and staying on the right side of HMRC. 🚗

What Is VAT and Why Does It Matter for Motoring Expenses?

First things first—what exactly is VAT?

VAT stands for Value Added Tax. It’s a tax charged on most goods and services sold in the UK. If your business is VAT-registered, you can often claim back the VAT you’ve paid on business expenses, including some motoring costs.

But—and this is the tricky part—you can’t reclaim all the VAT you’ve spent on vehicle-related items. The rules depend on how and why the vehicle is being used.

What Counts as a Motoring Expense?

Before we dive deep, let’s look at what falls under the umbrella of “motoring expenses.” Here are some common examples:

• Fuel (petrol, diesel, or electricity)
• Vehicle repairs and maintenance
• Leasing and hiring vehicles
• Buying a vehicle
• Parking fees and tolls
• Vehicle accessories (like GPS or roof racks)

Seems straightforward, right? Now let’s break down how VAT applies to each category.

1. Fuel: Can You Claim VAT?

This is one of the most common questions: Can I reclaim VAT on fuel?

The answer? Yes, but it depends. You need to decide between:

Claiming All VAT and Paying a Fuel Scale Charge

If you use the vehicle for both business and personal trips, you can claim all the VAT on fuel. But there’s a catch—you have to pay something called a fuel scale charge. This is a fixed amount that accounts for personal use of the fuel.

HMRC has set scale charges based on your vehicle’s CO₂ emissions. You can find the updated figures on the government website.

Claiming Only Business Use VAT

If you don’t want to mess with the fuel scale charge, you can just claim VAT for fuel used only for business trips. But—and here’s the tricky part—you’ll need accurate mileage records to prove it.

Keep a log of dates, destinations, and purposes of your trips. It’s more admin work, but could save your business money in the long run.

2. Vehicle Repairs and Maintenance

Whether it’s a routine service or fixing a flat tyre, you can usually reclaim VAT on repairs and maintenance bills. But even here, there’s a small twist.

If your employee’s private car was used for business (not owned by the company), you can still reclaim VAT on the repairs—as long as you pay for it.

Just remember: personal use will need to be taken into account for tax purposes.

3. Buying a Vehicle: Full, Partial, or No VAT?

This part often causes confusion.

Buying a Car

Buying a passenger car? You generally can’t reclaim VAT—unless the vehicle is used exclusively for business. That means:

• You don’t drive it home.
• You don’t use it for personal errands—even the quick shop stop.

Examples of full VAT reclaim:

• Driving school instructors’ cars (used only for teaching)
• Fleet taxis used exclusively by the business

Commercial Vehicles

Buying a van or goods vehicle? You can usually reclaim full VAT, especially if it’s strictly for business use.

4. Leasing or Hiring Vehicles

Short-term hire or long-term lease? The rules change based on duration and usage.

Let’s say you lease a car for your sales team, used partially for personal trips. In that case, you can usually reclaim 50% of the VAT. Why only half? Because private use is assumed.

But if the vehicle is used only for work? You might be able to reclaim 100%. Just make sure you have documentation to prove it!

5. Parking Fees, Road Tolls, and Fines

Here’s some good news:

• You can reclaim VAT on metered parking and road tolls if they qualify as business expenses.

But if your employee got a parking fine or speeding ticket during a business trip? No VAT reclaim there. HMRC’s rules are clear on this—fines aren’t eligible for VAT recovery, no matter when they happen.

6. Vehicle Accessories and Add-Ons

Need to add a sat nav or roof rack to your company car? Good news—these usually count as part of the vehicle purchase, and the VAT can be reclaimed if the car is eligible too.

But remember: if the vehicle itself doesn’t qualify for VAT recovery (like a personal-use car), then accessories won’t either.

Here’s a Quick Recap:

• Fuel: Claim full VAT with a scale charge or keep detailed mileage for business use only.
• Repairs: VAT is usually reclaimable—even for employees’ cars used on business.
• Buying a Car: No VAT claim unless the car is 100% company use.
• Commercial Vehicles: VAT is typically fully reclaimable.
• Leasing: Reclaim 50% VAT for mixed use; 100% for exclusive business use.
• Parking & Tolls: VAT reclaimable. Fines: No reclaim.
• Vehicle Accessories: Follows the VAT rules of the main vehicle.

Top Tips to Stay VAT Compliant with Motoring Expenses

Following the rules isn’t just about staying on the taxman’s good side—it can also save your business money. Here are some practical tips:

• Keep detailed records of mileage, fuel receipts, and trip purposes.
• Set up a clear vehicle use policy for your employees—outline what counts as business use.
• Run periodic reviews of motoring VAT claims to ensure you’re compliant.
• Stay updated—HMRC updates scale charge rates and tax rules regularly.

Common Mistakes to Avoid

Even seasoned business owners get tripped up by VAT on motoring expenses. Watch out for these common errors:

• Assuming you can always claim VAT on fuel even if the vehicle is used privately.
• Failing to log business mileage—HMRC could refuse your claim without evidence!
• Over-claiming VAT on leased vehicles when there’s personal use involved.
• Trying to reclaim VAT on traffic fines—just don’t. It’s not allowed.

Final Thoughts: Keep It Clean, Keep It Legal

Understanding and managing VAT on motoring expenses doesn’t have to be overwhelming. Once you know the rules—and put some good processes in place—it actually becomes manageable.

Use this guide as your reference point. And if you’re ever unsure? Don’t guess. Either check with HMRC directly or get advice from a trusted accountant.

After all, the goal isn’t just to save money. It’s to make sure your business stays compliant, transparent, and ready for anything the tax man might throw your way.

Want to Learn More?

The UK government offers a full breakdown of VAT on motoring expenses in VAT Notice 700/64. It’s worth a read if you want the finer details.

Still have questions? Let us know in the comments below—we’re here to help business owners like you drive straight through the paperwork and focus on what you do best.

Read more: https://www.gov.uk/guidance/vat-on-motoring-expenses-notice-70064