Q: I own a small but VAT-registered limited company. We do deliveries occasionally, and I’ve rented a van when needed, but this side of the business is growing and I think we need to get a vehicle of our own. I have a decent amount of cash to put to it personally, but the company itself doesn’t. Would I be ok entering a private hire purchase agreement and then using it in the business, or would there be tax implications? Would I be able to reclaim the VAT? And, if I occasionally used it personally, would I have to pay tax on it as a benefit in kind?


A: In virtually every way, you’d be better off having the company owning and paying for this vehicle: a private hire purchase agreement wouldn’t be advisable as it would be messy when you apply the payment for the vehicle against company funds.


If I were you, I would enter the hire purchase agreement with the company if that’s possible at all. If the finance provider has a difficulty with that, you can provide a personal guarantee. And if you need to put some up-front cash towards the purchase, you can transfer this to the company as a director’s loan, taking it back when the funds are available.


Revenue ask four questions when you’re looking to claim VAT back on a commercial vehicle: is the trader registered for VAT and generally entitled to claim VAT back; is the vehicle to be used for the purposes of the business; was VAT charged on the sale of the vehicle; and is the vehicle of a category that allows a repayment to be made? Based on what you’ve told me (and the fact that Revenue specifically identify vans as a type of vehicle that one can claim VAT back on), you should be able to reclaim it once you buy through the company. The issue of paying tax on benefit in kind for personal use is a greyer area. However, if it’s the case that you have your own transport and don’t habitually use it for personal reasons, you should be fine.


Eamonn Garvey


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