Guide to Claiming VAT on Motoring Expenses for UK Businesses and Sole Traders

Running a business in the UK comes with a lot of expenses, and if you’re using vehicles for your work—whether you’re delivering goods, visiting clients, or managing a fleet—you’re likely spending money on fuel, maintenance, and more. But did you know that you might be able to reclaim VAT (Value Added Tax) on many of those motoring expenses?

Whether you’re a sole trader, run a small business, or manage a limited company, understanding how VAT on motoring expenses works can help reduce your costs. The UK government has laid out clear guidance on this in VAT Notice 700/64. In this blog post, we’ll break it all down in plain English, so you know how to stay compliant and save money where you can.

What Is VAT and Why Should You Care as a Business Owner?

Let’s start with the basics: VAT (Value Added Tax) is a tax you add to the price of goods or services if you’re VAT-registered. In the UK, the standard VAT rate is 20%.

If your business buys products or services that include VAT, and those purchases are for business use, you may be able to reclaim some or all of that VAT. This includes many costs related to vehicles used for business.

What Motoring Expenses Can I Reclaim VAT On?

You can claim VAT back on a variety of motoring expenses—but not all of them, and not always at 100%. Here’s a quick look at what may be eligible:

• Fuel (petrol, diesel, biofuel, etc.)
• Vehicle leasing or hiring
• Servicing and repairs
• Vehicle parts and accessories
• Vehicle purchase (in some cases)
• Business insurance if it includes vehicle cover

Does that mean you can just claim VAT on every car-related expense? Not quite. It depends on how the vehicle is used—more on that next.

Business Use vs Private Use

One key thing HMRC looks at is whether the vehicle is used only for business purposes or for both business and private use.

If a vehicle is exclusively for business use (with no private travel at all—not even a single school run or trip to the supermarket), then you’re more likely to reclaim the full VAT.

However, if there’s any private use—even occasional—the rules change, and you’ll usually only be able to recover some of the VAT. For cars specifically, claiming full VAT is rare because proving 100% business use is difficult for most small businesses and sole traders.

Example:

Sarah runs a small gardening business and uses a van to carry tools and visit clients. She occasionally uses the van on weekends to go to the garden centre. Because it’s not used solely for business, she can’t claim 100% VAT on buying the vehicle. But she can still reclaim VAT on fuel and maintenance—even if adjusted for private use.

How Much VAT Can I Reclaim on Fuel?

Fuel is one of the most common vehicle costs. Here, you’ve got a few options when it comes to reclaiming VAT:

1. Reclaim 100% VAT (Only If All Fuel Is for Business)

If you’re sure all fuel is for work (and you can prove it), you can claim the full VAT amount.

2. Reclaim Partial VAT Using the Fuel Scale Charge

If you’re reclaiming VAT on fuel used for both business and private use, HMRC asks you to use a Fuel Scale Charge. This is a fixed monthly amount based on your vehicle’s emissions. You still claim full VAT on fuel, but you repay part of it using this scale to cover private use.

3. Only Reclaim VAT on Fuel Used for Business

This method gets tricky. You’d need to keep incredibly detailed mileage logs to work out how much fuel was used for business travel versus personal. It’s accurate, but admin-heavy.

4. Don’t Claim at All

If it’s too complicated or you don’t have proper records, you can choose not to reclaim any VAT on fuel. Sometimes, that’s the easier (and safer) option—especially for sole traders.

What About Leasing or Hiring a Vehicle?

If you lease or hire a vehicle for business, here’s how the VAT works:

• 100% VAT reclaim – but only if the vehicle is used purely for business (again, no private use).
• 50% VAT reclaim – if there’s any private use, which usually is the case for company cars.

Short-term vehicle hire is slightly different. If you hire a car for less than 10 days, and it’s used exclusively for business, you can usually reclaim all the VAT.

Can I Reclaim VAT on Vehicle Repairs and Maintenance?

Good news here: Yes, you can reclaim 100% VAT on repairs and maintenance—even if the vehicle is also used for private trips.

This includes routine servicing, buying new tyres, or fixing broken parts. It doesn’t matter if it’s a company-owned car, a leased van, or even your personal vehicle used for business purposes.

Buying a Car: Can I Reclaim VAT?

Here’s where things get tricky. Usually, no—VAT on car purchases is blocked unless the car is used 100% for business and not available for private use at all.

Think of vehicles like pool cars used only by employees during work hours and kept at the office overnight. That’s a grey area that might qualify. However, HMRC looks closely at these claims, so proceed with caution.

But if you’re buying a commercial vehicle (like a van or lorry), the VAT is generally reclaimable, even if there’s limited personal use.

What Records Do I Need to Keep?

You’ll need proper documentation to support your VAT claims. HMRC may ask for:

• VAT invoices or receipts for fuel, repairs, leasing, etc.
• Mileage logs showing business vs private travel
• Vehicle purchase agreements and leasing contracts
• Evidence that the vehicle is used solely for business (if claiming full VAT on a car)

Keep these records for at least six years, just in case you’re ever asked to prove your claims.

Flat Rate VAT Scheme and Vehicles

If your business is under the VAT Flat Rate Scheme, things change a bit. You generally can’t reclaim VAT on purchases—except for vehicles that cost over £2,000 and are considered capital expenditures used 100% for business.

So if you’re buying your first work van under this scheme, you might be eligible for a VAT refund. Talk to your accountant to check.

Top Tips to Maximize VAT Savings on Motoring Costs

• Keep every receipt: You can’t claim VAT without proper VAT invoices.
• Track mileage: Use an app or a simple spreadsheet to log business trips.
• Review fuel type choices: Think about how fuel-efficient your vehicle is—some claim methods work better depending on your usage.
• Use the Fuel Scale Charge: It’s easier than calculating exact business vs personal usage.
• Revisit your leasing terms: Are you getting the best VAT return possible?

Final Thoughts

Claiming VAT on motoring expenses can be a great way to save money as a business, but it’s important to get it right. HMRC rules are detailed and specific, but with good record-keeping and a basic understanding of how different expenses are treated, you’ll be well on your way.

Still unsure which method is best for your business? Or worried you might overclaim? It’s always smart to speak with a qualified accountant or bookkeeper who knows VAT inside and out.

Want to Learn More?

The official government guidance is detailed and worth reading if you want to go deeper into the subject. You can find it here:

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

Understanding how VAT applies to your vehicle expenses isn’t just about following the rules—it’s a smart business move that can help boost your bottom line.