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Private use of the Company Car, a bridge too far?

The recovery of VAT on cars remains a contentious area for UK businesses. HMRC usually take a robust approach and denies such claims.  This has, in the past, resulted in many appeals to the First-tier Tax Tribunal.

This was exactly what happened to Mr Graham (Barry John Graham v HMRC [2019] TC7313) who failed to persuade HMRC that he was entitled to claim the £20,805 of VAT he incurred purchasing some high-end cars for his business. As a specialist in mainframe computers, Mr Graham charged his clients fees of £3,000 – £5,000 per day and wanted to signify his status with the cars used by his business when he or his representatives visited clients.

Mr Graham appealed to the First-tier Tribunal arguing that:

  • He knew the cars should not be made available for private use.
  • He employed his son and daughter who each had a contract of employment which specifically banned private use of the cars.
  • The keys to the cars were kept in a safe with a combination lock to which only the trader knew the combination. If one of his children needed a car, he would provide them with the combination and then change it.
  • All three of them had cars of similar quality for private use.
  • He had accounted for 93% of the cars’ journeys and could, with effort, account for the remaining 7% in short journeys.

The tribunal dismissed HMRC’s arguments that:

  • The vehicle insurance policies allowed private use, as it is not possible to get business only cover.
  • The cars were parked at the trader’s home.

The First-tier Tribunal considered all of the facts and concluded that Mr Graham did not intend to use the cars privately, and that he did not intend to make the cars available for the private use of anyone. They were satisfied with the physical and contractual impediments that Mr Graham had put in place.


Unless a car is specific to a business, such as a driving school car, taxi or hotel courtesy car, the bar is set very high for a trader to claim VAT input tax:

  • It is not enough for a trader to show that no private use was made of the car.
  • They must show that it was not “made available” for private use.
  • This will usually require both legal and practical restrictions on private use.

To discuss any matters relating to the above or any other commercial or corporate tax concerns, please contact Sally Hutchings, Senior Associate Solicitor in the Dispute Resolution Team on 0208 971 1048 or email [email protected]


Although correct at the time of publication, the contents of this newsletter/blog are intended for general information purposes only and shall not be deemed to be, or constitute, legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article. Please contact us for the latest legal position.

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