Buying a car through the business sounds like it should make the VAT go away. Sometimes it does, and often it does not, and the difference comes down to how the car will be used. The good news is that the rules are written down clearly by HMRC, and the cash side is easier to manage than it used to be.
This guide covers bringing a car into Great Britain for a VAT-registered business. It is general information from GOV.UK, not tax advice, so check your own position with your accountant.
The import itself works the same way
A car imported by a company goes through the same steps as one imported by a private buyer. There is an import declaration and VAT and duty at the border. After that comes NOVA, vehicle approval and DVLA registration.
The rates are the same too. GOV.UK's table is plain that a VAT-registered importer pays VAT and customs duty, just like anyone else. On a car bought outside the EU, that usually means 10% duty and 20% VAT, worked out on the price plus shipping. The import tax calculator gives a figure. Transfer of Residence relief is for people moving home, so it does not help a business purchase.
What being VAT registered changes is how the VAT can be paid and whether any of it comes back.
An EORI number
GOV.UK says you may need an EORI number to move goods between Great Britain and any other country, including the EU. The exception is goods that are for personal use only and not controlled. A car bought for the business is not personal use, so the business should have one before the car is cleared.
Postponed VAT accounting
Normally import VAT is paid at the border, before the car is released, and reclaimed later. Postponed VAT accounting lets a VAT-registered business declare the import VAT and recover it on the same VAT Return instead. GOV.UK says no approval is needed to use it.
It works if both of these apply:
- The car is for use in your business and you have the right to dispose of it, usually as the owner
- Your VAT registration number is on the import declaration
When a customs agent makes the declaration for you, GOV.UK says you must tell them in writing that you want to use postponed VAT accounting, and they need that before they can submit. The choice cannot be changed once the declaration is in. Afterwards, the import appears on your monthly postponed import VAT statement, which you get through the Customs Declaration Service.
We clear cars as HMRC CDS registered customs agents, so tell us at the quote stage if you want it and we will need the instruction in writing.
Postponing is not the same as reclaiming. GOV.UK says the normal rules on what you can reclaim as input tax still apply. Postponed VAT accounting changes when the VAT is accounted for. It does not make VAT on a car recoverable if it would not have been anyway.
The block on reclaiming VAT on cars
This is the part that surprises people. HMRC's notice on motoring expenses, Notice 700/64, says that as a general rule you cannot recover the VAT on buying, importing or acquiring a car. It is blocked, whatever the business does.
The VAT can be recovered in full only on an excepted car. That is a car which:
- Is stock-in-trade of a motor manufacturer or dealer
- Is intended to be used primarily as a taxi, a driving instruction car or for self-drive hire
- Will be used exclusively for the business and not made available for anyone's private use
Stock-in-trade for dealers
For a dealer, a car counts as stock-in-trade if the intention is to sell it within 12 months of the date the VAT was incurred on its purchase or importation. HMRC adds that this does not include second-hand cars that are not qualifying cars. If a car stops being stock and does not fit another exception, a self-supply happens, and output tax is due on its value at that point.
Exclusive business use
HMRC sets a high bar here. A car is used exclusively for business only if it is used for business journeys and is not available for private use. Buying it for the business is not enough on its own: if there is nothing stopping you or an employee using it privately, it counts as available.
Pool cars can qualify, as long as the car is normally kept at the main place of business, is not allocated to one person and is not kept at an employee's home.
| Feature | Import VAT reclaimable? | Why |
|---|---|---|
| Dealer stock to sell within 12 months | Yes, in full | Stock-in-trade exception |
| Taxi, driving school or self-drive hire car | Yes, in full | Excepted use, if it is a qualifying car |
| Pool car kept at the business | Yes, if HMRC’s pool car conditions are met | Not available for private use |
| Director’s or employee’s car | No | Available for private use, so blocked |
Not every vehicle is a car
The block only applies to vehicles that count as cars for VAT. HMRC's definition is a road vehicle with three or more wheels that is built or adapted mainly for carrying passengers, or that has side windows behind the driver's seat. Notice 700/64 lists vehicles that are not cars, including:
- Vehicles that carry only one person, or 12 or more including the driver
- Vehicles with a payload of one tonne or more
- Vehicles of 3 tonnes unladen or more
- Caravans and special purpose vehicles
So a van imported for the business is treated differently from a saloon. HMRC also warns that converting a van into a car, for example by fitting rear seats, has its own VAT consequences.
Before the car ships
For a business import
0 of 6 done
For dealers and fleets
If you are bringing in cars to sell, the volume side matters as much as the VAT. My Car Import has its own privately operated IVA and MSVA lanes, storage for 300 vehicles on site and access to dealership-level registration systems for fleet registrations. Customs, testing and the DVLA all happen in one place, which keeps the time between landing and sale short.
For the timings, see how long registration takes and the IVA test explained. On long routes, a shared container is the cheapest way to send a car, as our guide to container, RoRo or air explains, and our container service explains shared and dedicated boxes. For cars from outside Europe, our customs delays guide is worth reading before the first one lands.
Questions people ask
Can my business reclaim the import VAT on a car?
Usually not. HMRC Notice 700/64 says VAT on buying or importing a car is blocked, except for dealer stock, cars used primarily as taxis, driving school cars or self-drive hire, and cars used exclusively for business with no private use available.
What is postponed VAT accounting?
A way for a VAT-registered business to declare and recover import VAT on the same VAT Return, instead of paying it at the border. GOV.UK says no approval is needed, but you must tell your customs agent in writing.
Does postponed VAT accounting mean I do not pay VAT on the car?
No. GOV.UK says the normal input tax rules still apply. If the VAT on the car is blocked, it is still due. Postponed accounting only changes when it is accounted for.
Does a business pay import duty on a car?
Yes, on the same basis as anyone else. On a car bought outside the EU that is usually 10% duty plus 20% VAT, worked out on the price and shipping.
Do I need an EORI number to import a car for my business?
GOV.UK says you may need one to move goods into Great Britain, unless the goods are for personal use only and not controlled. A car bought by a business is not personal use.
Bringing in one car or a batch for the business? Send us the details on the quote form.
