Parker O’Regan Tann & Co

Bangor 01248 364 230 | Colwyn Bay 01492 536440 | mail@port.ac

Search


VAT recovery on car leasing


26/03/2026

The VAT treatment of car leasing is an important consideration for businesses that incurs VAT on these costs. 

In general, leasing companies are able to recover the VAT incurred on the purchase of cars, provided the vehicles are leased out at a commercial rate. 

For businesses leasing a car, however, the position is more restrictive. Where a business leases a 'qualifying car' for business use, only 50% of the VAT on the lease payments is typically recoverable. This restriction reflects an assumed element of private use, even if the car is mainly used for business purposes.

There are some exceptions to this rule. Where a car is used primarily for taxi services (hire with a driver) or for driving instruction, businesses can usually recover 100% of the VAT charged on the lease.

It is also worth noting that the 50% block applies not only to long-term leasing but also to short-term self-drive hire, such as daily rentals used to temporarily replace a company car. The 50% restriction does not apply where a car is hired for a period of no more than 10 days, provided it is used exclusively for business purposes.

Understanding these rules ensures is important to ensure the correct amount of VAT is recovered on car leasing costs. 


Colwyn Bay Office

Office 5
Colwyn Business Centre
15 Wynnstay Road
Colwyn Bay 
Conwy 
LL29 8NB
 
01492 536440
This email address is being protected from spambots. You need JavaScript enabled to view it.

Membership

 

   

     

Newsletter Sign Up

With our newsletter, you automatically receive our latest news by  e-mail and get access to the archive including advanced search options!

Newsletter Sign Up  |  Login

Newsfeed Search