Andrew Needham looks at the VAT treatment of electric and hybrid cars and dispels a few myths about tax breaks.
There are some commonly held misconceptions about the VAT breaks for businesses buying electric and hybrid cars, even by car dealers trying to sell a new car. There have been a number of cases of businesses being advised by their car dealers that businesses can recover the VAT on the purchase of an electric car.
What tax breaks does HMRC actually allow, and what are just misconceptions?
Misconceptions and reality
The first point is that HMRC has no special tax breaks for electric cars and hybrids. The VAT recovery position is that VAT can only be recovered on the purchase of the car if there is no private use at all, and that includes home-to-work journeys. So, a business can only reclaim the VAT on the purchase of the car if it is for
