Car maintenance costs deductible against CT

Car maintenance costs deductible against CT

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Car tax experts a quick question for you

If a company contract-hires a car, including maintenance, I understand that the cost of the maintenance element is 100% deductable against CT and that the VAT element of the maintenance can be reclaimed.

However, if the company purchases the car, are company payments for maintenance, servicing, etc, also deuctable against CT and is the VAT on the maintenance reclaimable?

Thanks in advance for your replies.

Captain

Replies (16)

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By johngroganjga
22nd Aug 2014 13:22

Yes of course they are, provided the car is used in the business.  Why wouldn't they be?

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By Captainblack
22nd Aug 2014 13:28

I should have said

The car would be used for business and some personal use by the Director whose car it will be.

I ask because of the rules around only claiming back half of the VAT on contract hire payments.

Captain

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Replying to User deleted:
By johngroganjga
22nd Aug 2014 14:26

Quid pro quo

Captainblack wrote:

I ask because of the rules around only claiming back half of the VAT on contract hire payments.

Captain

I imagine that his is just a quid pro quo to recognise that if the car was purchased no VAT on the purchase would be recoverable, but all the rest would be.

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By cparker87
22nd Aug 2014 13:34

Mixed

No VAT Recovery on the acquisition of the Car itself, presuming that it cannot qualify as a Van.

Not sure in respect of the maintenance but to liken it to Fuel BIK I would suggest that the provision of the benefit in kind to the director is in the furtherance of business of the Company and on that basis the VAT recoverable on the maintenance.

As the Car is acquired for the provision to an Employee it will be eligible for WDAs and associated costs allowed for CT.

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By andy.partridge
22nd Aug 2014 13:42

Yes

The answer to your question is 'yes'

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By neileg
22nd Aug 2014 15:38

Mmm...

On contract hire payments you reclaim VAT on 50% of the finance element and 100% of the maintenance element.

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By cfield
01st Sep 2014 13:08

Only need minimal business use

An interesting point on maintenance bills (for both company cars and private cars used by sole traders/partnerships) is that you can claim 100% of the input tax even if the car only has the bare minimum of business use. One trip to the Post Office a year would be sufficient. No restriction is necessary for private use of the car, as would be necessary in the case of other types of asset; e.g. computers.

This is in marked contrast to VAT on fuel, where you have to either pay output tax on the scale charges or restrict input tax to business use pro-rata the mileage.

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Morph
By kevinringer
01st Sep 2014 13:21

But who is the supply made to?

If the company owned the car and incurred maintenance costs then no problem. But in this scenario the car is owned by the director. Company will need to be careful that the supplier of maintenance makes their supply direct to the company and not the director. If the garage supplies direct to the director then no supply has been made to the company so no vat recoverable. Also, the company is settling a liability of the director so don't forget BIK.

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Replying to DJKL:
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By neileg
01st Sep 2014 13:26

Eh?

kevinringer wrote:

If the company owned the car and incurred maintenance costs then no problem. But in this scenario the car is owned by the director. Company will need to be careful that the supplier of maintenance makes their supply direct to the company and not the director. If the garage supplies direct to the director then no supply has been made to the company so no vat recoverable. Also, the company is settling a liability of the director so don't forget BIK.

Your advice is fine but nowhere in this thread is it stated that the car belongs to the director. It is said that it is 'his' car but I think we assumed that it was a company car for his exclusive use. Perhaps the OP could clairify this?
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RLI
By lionofludesch
01st Sep 2014 13:33

Avatar

I'm just wondering why Captain Black's avatar is Captain Scarlet........

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Replying to pauld:
Morph
By kevinringer
01st Sep 2014 13:38

The best AW question ever

lionofludesch wrote:

I'm just wondering why Captain Black's avatar is Captain Scarlet........


The most important question ever asked on AW - I've often wanted to ask but been too scared of the mysterons.
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By Captainblack
01st Sep 2014 13:49

It's because ... the only images I can find for Captain-Black are of poor quality!

OO

Captain

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RLI
By lionofludesch
01st Sep 2014 14:30

I see

Fair enough, Conrad.

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By Gimlet2008
01st Sep 2014 14:33

Captain Scarlett is (supposedly) indestructible.That may have a bearing...

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By Captainblack
01st Sep 2014 14:36

To clarify ... the car will be purchased by the company for use (as a company car) by a Director.

Captain

[ not feeling indestructible today :-(   ]

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Morph
By kevinringer
01st Sep 2014 14:47

I misunderstood ...

... I thought the car was owned by the director. Company can recover 100% maintenance. See 5.1 of 700/64 and also HMRC manual VIT54500. I would post the link but for some reason AW won't let me paste straight into the post. 

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