VAT Implications on vans
Commercial vehicles
VAT-registered businesses can generally reclaim the VAT when they buy a commercial vehicle. Any vehicle is a commercial vehicle if it has a payload of one tonne or more, or an unladen weight of three tonnes. In addition, it's normally easy to tell the difference between a car and a commercial vehicle like a van, lorry or tractor. But there are some vehicles where it's harder to be sure whether they're a car or a commercial vehicle. These vehicles are car-derived vans and vans with rear seats - combination vans, or combi vans.
Car-derived vans
Car derived vans are based on cars and look similar to cars on the outside. But either the manufacturer or a vehicle converter has altered the inside of the vehicle so that it's sold as a commercial vehicle. For example the rear seats and seat belts will have been taken out and a new floor panel will have been fitted in the back to make a load area. The rear side windows will have been replaced by opaque panels.
HM Revenue & Customs (HMRC) considers that a car derived van is a commercial vehicle if it meets all three of the following conditions:
- The alterations that the manufacturer or vehicle converter makes meet the technical requirements that HMRC specifies in their guidance. If you're not sure if the alterations do meet the requirements it's advisable to get written confirmation from your vehicle supplier. You can contact HMRC if you need more information about the guidance.
- The adaptations give the vehicle the functionality of a commercial vehicle. For example, it's not enough to just take out the back seats.
- It must be quite clear that the space that remains behind the front row of seats is highly unsuitable for carrying passengers.
If it meets these conditions then it's a commercial vehicle and you can reclaim the input VAT.
Contact HMRC about the technical requirements for commercial vehicles
Vans with rear seats
Some vehicles look like vans and don't have windows in the sides behind the driver. But they do have additional seats for carrying passengers behind the front row of seats (or they're designed so they can be fitted with them). They're sometimes known as combination vans or combi vans.
HMRC considers that this type of vehicle is a commercial vehicle for VAT purposes if it meets either of the following conditions:
- It has a payload of more than one tonne after the extra seats have been added.
- The dedicated load area (the load area that's completely unaffected by the extra seats) is larger than the passenger area. This means that the main use of the vehicle is for carrying goods rather than passengers.
If it meets either of these conditions then the vehicle is a commercial vehicle for VAT purposes and you can reclaim the input VAT if you follow the normal rules for reclaiming VAT.
HMRC list of car derived vans and vans with rear seats
HMRC has produced a list of car derived vans and vans with rear seats showing whether they're classed as a van (commercial vehicle) or a car for VAT purposes. Remember that vehicle specifications change so the list may not be up to date. If you're in any doubt you can contact HMRC for guidance.
Check the HMRC list of car derived vans and combi vans
Contact HMRC for VAT guidance on a particular vehicle
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