Builder Wins HMRC In Business Car Vat Appeal
Builder Jane Borton has won an appeal against the tax man for failing to allow her to claim back VAT on a car she bought for business.
She reclaimed the £4,913 VAT she paid to buy a Land Rover Freelander exclusively for business use.
But HM Revenue and Customs (HMRC) objected and disallowed the claim while imposing a £736 misdeclaration penalty arguing the car was available for her to use personally.
Sole trader Borton appealed the ruling to the First Tier Tax Tribunal, which upheld her claim and ordered the penalty should be withdrawn.
She told the tribunal that she bought the car solely for her business as a specialist builder so she could visit sites and transport tools, equipment and materials to where she worked.
The Freelander was kept on her drive as she ran the business from home and often attended emergency call-outs.
Crucially, she only insured the vehicle for business and told the tribunal she never intended to drive the car for personal use as she had another vehicle for private trips.
Borton also explained the Freelander was too dirty for private use due to the nature of her work.
The tribunal ruled that HMRC could not show that she drove the Freelander outside work and that because the car was only insured for business, she did not intend to use the vehicle for any other purpose.
The takeaway for landlords is that a sole trader can buy a car for business, and as long as the vehicle is insured for use in the business and is not intended for private use, it is tax treated as a business asset.
This makes the costs of running and maintaining the vehicle business expenses.
The case hinged around whether the car was available for private use, not actually driven on personal trips.
Because the vehicle was only insured for business, the tribunal took the view that it was unavailable privately, a little-known legal loophole derived from the case The Commissioners for Customs & Excise v Upton  EWCA Civ 520.
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Tax is an aspect of residential property investment which is often overlooked. There are many twists and turns to consider at all levels, whether for income tax, capital gains tax or inheritance tax. It is vital to get the ownership structure right and ensure that all tax relief, allowances, and claims are made.