VAT & private use of vans.

VAT & private use of vans.

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A client has two businesses and operates one as a self employed trader, the other as a limited company both being VAT registered. The company owns a van which is occasionally used for the other business.

Does this lead to a VAT scale charge in the company because of non-business use even though this would effectively wipe out all VAT recovery on fuel given the amount actually spent in any quarter?

Does it also trigger a benefit in kind?

If the client reimburses the company for the non-business use at say 40p per mile does the company have to account for VAT on that and, if so, can the other business fully recover that VAT?
Andrew Todd

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chips_at_mattersey
By Les Howard
24th May 2005 17:26

No scale charge, but there may be an output tax charge
The petrol scale charge applies to "vehicles" (VATA ss 56,57) however, HMRC have stated that it only applies to cars (Tolley's VAT 2005, para 45.17).
Strictly, there is an output tax charge since there is a 'supply.' This means that the business owning the van should charge the other business for the use it makes. Your 40ppm charge would be standard rated, but the input tax would be recoverable subject to the normal rules.

I cannot answer the 'benefit in kind' question.

Les Howard
VAT Consultant

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