A refreshingly unexpected decision from the tribunal that three cars (an Audi A8, a Mini Cooper and a Porsche Cayenne), kept at the director’s home address were not available for private use – with the result? Full input VAT recovery!
Not for the first time have we seen the argument about VAT claims on cars. Is it business or personal? Time and again, we see HMRC refusing claims for input VAT on cars because there is an element of private use. Even the possibility of private use. Of course, that is what VAT is all about – a tax where the burden sits with the end customer and businesses, in the normal course of events, can recover it as an overhead. ‘Business’. There it is. The goods or services in question must be used ‘exclusively’ for the purposes of the business. Which is why, except perhaps for ‘pool cars’, most businesses would not even attempt to recover VAT on cars.
So how did the Grahams (TC07313) ensure that the possibility of private use was excluded? Well, the keys were kept in a locked safe, to which only Mr Graham had access. Contracts with his children (who were employees of the business) expressly forbid personal use. Alternative vehicles were owned for private use and finally, a reconciliation is carried out at the end of each year checking the mileage of the cars versus business trips travelled.
In this instance, the tribunal had to decide whether to allow VAT claims on cars. Is it business or personal? and was satisfied that the appellant had put sufficient legal and physical impediments in place which could only point to the intention that there would be no private use. Mr Graham had successfully claimed VAT on previous vehicle purchases so was aware of the requirements and clearly the tribunal was happy that he met the test. Perhaps a good example of precisely how businesses should approach VAT? Understand the rules and then implement thoroughly. Imagine that!?
These arguments are fact dependent and if you need help we would be happy to hear from you. Remember that sooner is always better.