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VAT recovery for motor dealers

Full consideration of input tax recovery is set out in V3.4. However, there are a number of challenges particular to the motor dealer sector which are worthy of mention.

The input tax blocking order

There is a general block on the recovery of input tax on motor cars. The scope of this provision is addressed in V3.443. It should be highlighted that the blocking order does not apply to 'stock in trade' cars (see below).

Demonstrator and courtesy cars—the stock in trade car rules

Despite the general block on input tax recovery on cars, motor dealers are entitled to recover VAT on stock in trade cars. Generally it is demonstrator and courtesy cars that are likely to fall within this category. The meaning of stock in trade cars and the rules surrounding recovery are set out in V3.443. Dealers recovering VAT on stock in trade cars should not neglect the obligation to account for VAT on the private use of the cars (see V6.312).

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