Guide to Claiming VAT on Motoring Expenses: What UK Businesses Need to Know

Running a business in the UK often means you or your team are spending time on the road. Whether it’s delivering products, visiting clients, or just picking up supplies, all of this travel can add up quickly. But did you know you might be able to claim back VAT on some of these motoring expenses?

Yes, that’s right! If you’re VAT-registered, you could be saving your business some serious money each year. In this easy-to-follow guide, we’ll walk you through everything you need to know about claiming VAT back on motoring expenses, based on the official guidance from HM Revenue and Customs (HMRC). So, buckle up – let’s hit the road to savings!

What Are Motoring Expenses?

Motoring expenses cover a wide range of costs related to using, maintaining, and running motor vehicles for business purposes. Here’s a breakdown of what could count as motoring expenses:

• Fuel (petrol, diesel, LPG)
• Servicing and repairs
• Lease or hire of vehicles
• Vehicle insurance
• Road tax
• Parking fees and tolls
• Accessories and parts

However, not all of these are eligible for VAT recovery. Let’s take a closer look at the rules.

Who Can Claim VAT on Motoring Expenses?

If your business is VAT-registered in the UK and uses a vehicle for business purposes, you may be eligible to reclaim VAT on certain expenses. But, there’s a catch — HMRC requires you to only claim for the portion of costs that relate strictly to business use. So, if a vehicle is used for both personal and business reasons, you’ll need to make adjustments. More on that shortly!

Claiming VAT on Fuel

This is one of the most common areas where businesses try to reclaim VAT. There are a few ways to do this depending on how you use your vehicle and how you record fuel usage:

1. Claim Full VAT (Business Use Only)

If the vehicle is only used for business purposes — meaning no personal miles at all — then you can reclaim 100% of the VAT on fuel costs.

2. Claim a Partial VAT (Using Mileage Records)

This is a popular method. You keep detailed mileage logs that split business and private travel. You then claim VAT back only on the business portion.

3. Use HMRC’s Fuel Scale Charge

If keeping track of every journey sounds too time-consuming, this method may work for you. It lets you claim all VAT but then pay back a fixed amount — called a fuel scale charge — based on emissions (CO₂ output of the vehicle). Be aware that this is only worth it if your business trips are frequent and long enough to offset the scale charge.

What About Leased or Hired Vehicles?

This is where it gets a little tricky. If you’re leasing or hiring a car solely for business use, you can generally reclaim 50% of the VAT on the lease payment. Why not the full amount? HMRC assumes there’s some private use unless you can prove otherwise. Vans and commercial vehicles often have different rules, so you may be able to reclaim 100% VAT on those.

Tip: Want to maximize your VAT refund? Keep solid records that demonstrate how the vehicle is used, especially if there’s minimal or no private use.

VAT on Repairs and Maintenance

This one’s a bit more generous. If your business pays for repairs or routine maintenance — say new tyres, an oil change, or brake replacements — you can generally reclaim 100% of the VAT, even if it’s a car that’s also used privately.

Why? Because according to HMRC, these costs are considered part of keeping the business asset (the vehicle) operational — whether it’s driven for business purposes or not.

VAT on Accessories and Parts

Need a new sat nav, replacement wipers, or upgraded tyres? As long as they’re fitted to a vehicle that’s used for business and the purchase was made through the business, you can usually reclaim VAT on them.

When Can’t You Reclaim VAT?

Of course, HMRC puts in a few limitations on when you can and can’t claim. You cannot reclaim VAT on:

• Buying a car that’s used for both personal and business purposes (unless it qualifies as 100% business use)
• Parking fines or speeding tickets
• Vehicle insurance premiums (these are exempt from VAT, so there’s nothing to reclaim)
• Road tax (this isn’t subject to VAT either)

Knowing where the line is drawn can prevent costly mistakes during your next VAT return.

Keeping Records – Why It’s So Important

Ever tried doing a jigsaw puzzle with half the pieces missing? That’s what processing a VAT claim without proper records feels like to HMRC — frustrating and unlikely to work out in your favour.

To successfully make VAT claims on motoring expenses, keep clear and accurate records such as:

• Invoices showing VAT separately
• Mileage logs for each journey (start point, end point, reason, distance, date)
• Fuel receipts with VAT amount shown
• Lease agreements or hire contracts

Quick story: One of my clients, a small marketing agency in Manchester, nearly missed out on hundreds of pounds of VAT refund because they were using fuel cards but not keeping mileage logs. A quick system set-up for tracking business journeys helped them turn things around fast — and they’ve been claiming successfully ever since!

What About Electric Vehicles – Are the Rules Different?

As more UK businesses switch to electric vehicles (EVs), it’s natural to wonder how VAT works here. The good news is, many of the same rules apply.

You can claim VAT on:

• Electricity used to charge business vehicles at business premises
• Repairs, servicing, and parts used for EVs

But — and it’s a big but — if your staff charge business EVs at home, the rules get blurry. As of now, VAT on home charging electricity can’t be reclaimed, even if it was for business use. HMRC is reviewing this, so stay tuned for possible updates.

Top Tips for Maximising VAT Reclaims on Motoring Costs

• Use logbooks or digital apps to track mileage and journeys accurately.
• Train your team on what receipts and logs are needed for VAT reclaims.
• Work with an accountant or bookkeeper familiar with motoring VAT rules.
• Review fuel scale charges annually — rates change every year and your car’s CO₂ output may impact your charges.

Final Thoughts

Claiming VAT on motoring expenses can feel a bit overwhelming at first, especially with all the ifs, buts, and exceptions. But once you get into a rhythm — tracking mileage, saving receipts, and understanding what’s eligible — it becomes second nature.

And let’s be honest: Who doesn’t want to save money where they can? If your business uses vehicles regularly, reclaiming VAT could free up hundreds (if not thousands) of pounds each year — savings that could go towards growth, better tools, or simply cushioning your bottom line.

So the next time you fill up the tank, remember: That receipt might just be money back in your pocket.

Want to Learn More?

For full details, you can read HMRC’s official notice here: https://www.gov.uk/guidance/vat-on-motoring-expenses-notice-70064