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

Whether you run a small business with a company car or you’re self-employed and using your personal vehicle for work, you might be leaving money on the table when it comes to VAT. HMRC allows you to reclaim VAT on certain motoring expenses—if you know what to look for. But it can get a bit confusing, right?

In this guide, we’ll break it all down in plain English—no legal jargon, no headaches. Just the facts you need to save money, stay compliant, and understand how VAT on motoring expenses works for your UK business.

What is VAT on Motoring Expenses?

Before we get into the nitty gritty, let’s start with the basics:

VAT (Value Added Tax) is a tax businesses pay when buying goods or services. If you’re VAT-registered, you can reclaim the VAT you pay on most of your business expenses—yes, including some related to vehicles.

But, not all vehicle-related expenses are fully reclaimable. That’s where understanding VAT rules really matters.

What Kind of Vehicles Are We Talking About?

Let’s be clear: Not every vehicle qualifies when it comes to reclaiming VAT.

Generally speaking, you can reclaim VAT on vehicles used for business purposes—these could include:

• Cars (though restrictions apply)
• Vans and commercial vehicles
• Motorcycles, if used primarily for work

Here’s the key difference: HMRC is more generous when it comes to vans and commercial vehicles because they’re more likely used for business. But company cars? The rules are stricter because they’re often used for private trips too.

Can You Recover VAT on Buying a Vehicle?

Let’s say you buy a vehicle for work. Can you reclaim the VAT? The answer depends on how that vehicle is used.

Cars

This is the tricky part. VAT on car purchases is only reclaimable if:

• You only use the car for business (no personal use at all)
• The car is not available for private use by an employee

So unless the car is locked up on weekends or your employees never use it for a personal errand, you likely can’t reclaim VAT. You may be asked to provide evidence, like fleet management logs or policies prohibiting personal use.

Commercial Vehicles (Vans, Lorries, etc.)

This is easier. If you buy a van or lorry for work purposes, you can usually reclaim all the VAT—even if you use it privately now and then.

What About Leasing or Hiring Vehicles?

Leased Cars

If you lease a car for both business and personal use, you can usually recover 50% of the VAT on the lease payments. Why only half?

Because HMRC assumes the other half is for personal use. Want to reclaim 100%? You’ll need to prove there’s no personal use—which is very hard to do with company cars.

Short-Term Vehicle Hires

Renting a vehicle for less than 10 days? You might be able to reclaim all the VAT—if it’s used solely for business during that time. Temporary hires get a bit more flexibility because they’re often for specific work trips.

Other Motoring Expenses You Can (and Can’t) Reclaim VAT On

Let’s move beyond the vehicles themselves. You still have to fuel them, maintain them, and maybe even park them. Here’s how VAT works on those expenses:

Fuel

This one trips up a lot of businesses. The rules vary based on how you handle the VAT.

Option 1: Reclaim VAT on all fuel + pay fuel scale charge

If you have one or more vehicles and keep VAT receipts for all fuel, you can reclaim all the VAT. But—there’s a catch:

You must pay the fuel scale charge, which is a set VAT amount based on your car’s CO₂ emissions. It’s HMRC’s way of accounting for private use.

Option 2: Only reclaim VAT on business fuel (with logs).

You can avoid the fuel scale charge by tracking all your mileage. This means maintaining a mileage log showing business journeys, dates, and destinations.

The benefit is you only reclaim VAT on fuel used for work. The downside? You need detailed records.

Repairs and Maintenance

Great news here: You can usually reclaim 100% of the VAT on upkeep—even for repairs of company cars used privately.

That includes things like:

• Oil changes
• Servicing
• Tyres or brake work

Just make sure the invoice is made out to your business and not to an individual.

Fuel Cards

Fuel cards make it easier to manage VAT. Since everything’s itemised, VAT can be cleanly claimed as long as it aligns with business use or you apply the fuel scale charge.

Parking and Toll Charges

Yes, you can reclaim VAT on parking fees encountered during business trips—as long as VAT was charged (look for it on the receipt). However, parking fines and speeding tickets are not eligible for VAT recovery.

What Records Do You Need to Keep?

This is a big one! HMRC expects VAT records to be accurate. That means:

• VAT invoices from suppliers
• Mileage logs for business fuel claims
• Lease agreements showing VAT charges
• Policies on employee car use (if claiming full VAT)

Without these, even legitimate claims can be rejected. So it’s worth setting up a system to keep everything in order.

How Do You Actually Claim VAT Back?

If you’re VAT-registered, you already submit regular VAT Returns (usually quarterly). Motoring expenses can be included right in there.

When preparing your VAT Return, simply include the reclaimable VAT from:

• Vehicle purchases (if eligible)
• Lease payments
• Fuel receipts
• Repair and service invoices

Pro Tip: Keep an eye on the deadlines, and don’t forget to submit everything digitally via Making Tax Digital if your business falls under those rules.

Final Thoughts: Keep It Simple, Keep It Safe

Many UK businesses either overpay VAT or accidentally get non-compliant—simply because the rules around motoring expenses are so specific.

Here’s how to stay on track:

• Use fuel cards or collect VAT receipts
• Decide between business-only fuel claims vs. fuel scale charges
• Keep personal use separate from business use
• Store all invoices and logs digitally

It’s like learning to drive—a little tricky at first but smooth sailing once you know the rules of the road.

Need More Details?

This was an easy-to-digest overview of VAT on motoring expenses. If you want to dive into the official HMRC guide, check out the full details here:

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

Remember: You don’t have to be an accountant to understand VAT—but it sure helps to follow sensible advice and keep clean records. Happy claiming!