What is a VAT-Qualifying Vehicle?

If you wish to buy and export vehicles from the UK, you can make big cost savings if they’re VAT-qualifying. Whether the vehicles are new, used (often up to four years old), or ex-lease, if they meet the VAT-qualifying criteria, you can reclaim 20% off the purchase price from HMRC. Carry on reading to find out what makes a vehicle VAT-qualifying (and what doesn’t), the benefits that arise, and how you can make the reclaim successfully – either yourself or through a dealer.

What is VAT?

Value Added Tax (VAT) is a tax applied to goods and services by HM Revenue and Customs (HMRC) – currently set at 20%, with discounts applying for certain items. VAT will be included in the advertised price of a car or vehicle.

Which vehicles are VAT-qualifying?

A vehicle is classed as “VAT-qualifying” if it’s purchased solely for commercial use by a VAT-registered company or individual. It could either be bought brand new from a main dealer or bought second hand from a business. You may also come across the term “gross VAT-qualifying” if the vehicle is registered to a business.

Vehicles for which the reclaim is usually carried out vary from cars and lorries to trucks and vans (including combi vans and motorhomes if used exclusively for business). There are different rules to be aware of for taxis and hire vehicles etc.

Which vehicles are not VAT-qualifying?

All previous vehicle owners must have reclaimed the VAT after each sale, otherwise the vehicle will have lost its VAT-qualifying status. Or, if the vehicle has been privately owned at any point, the VAT is no longer reclaimable, and the VAT-qualifying status cannot be reinstated.

Benefits for Export Customers

When a VAT-qualifying vehicle is being exported from the UK, international buyers don’t have to pay the 20% VAT in the advertised price. For example, on a vehicle that costs £36,000, then £6,000 of VAT can be reclaimed from HMRC when the vehicle is exported.

Benefits for UK Customers

The VAT saving isn’t limited to exporters only – if you’re a UK VAT-registered buyer, you can also reclaim 20% VAT if you’re buying a vehicle solely for business purposes. For private buyers, it’s still possible to buy a VAT-qualifying vehicle, but you won’t be allowed to make the reclaim.

How do I reclaim the VAT?

If you’re looking to buy and export a UK car outside the EU, you need to understand how the VAT reclaim process works – if you don’t follow the correct steps, you could miss out on a 20% saving off the export purchase. It also needs to be done within three months of full payment to the seller (including the export). Some buyers decide to reclaim the VAT themselves, while others get help from the vehicle dealer.

1. Reclaim the VAT yourself

When buying directly from a UK dealer, ensure that they give you an invoice with the VAT breakdown for your reclaim. Documents must be written and presented correctly, without any false information, and you’ll need to provide details about yourself, your circumstances, and the vehicle. These usually include the Bill of Sale/Invoice, proof of export (Bill of Lading or Departure Notice), and the export Customs declaration – which will all need to be retained for at least six years. Make sure the car doesn’t get registered to a private UK address, as this could negate your entire claim.

2. Reclaim via a UK independent dealer

Many UK vehicle dealerships will process the VAT reclaim for you – but it’s important to be aware that not all of them are set up to do this in-house. Some will handle the entire process, but some may also request that you cover the VAT cost until retrieved from HMRC, which presents a higher risk if the VAT reclaim isn’t successful. Make sure you buy from a legitimate, experienced dealer with positive reviews, and you should never be asked to provide information beyond what’s necessary for the VAT reclaim forms.

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