A supercar as a business expense? That’s certainly one way to make HMRC look twice.
A recent tax tribunal case involving a luxury vehicle hire business and a hypercar has raised an interesting question: when can a business reclaim VAT on a car?
The supercar that caught HMRC’s attention
In Luxurico Ltd v HMRC [2026] UKFTT 01252 (TC), the company had incurred more than £477,000 in VAT when acquiring a hypercar for its luxury vehicle hire business.
HMRC challenged the VAT claim, questioning whether the vehicle was genuinely intended for commercial hire, particularly as there was limited evidence of it being hired out after purchase.
Luxurico argued that the car had always been intended for its hire business. However, mechanical problems, the impact of COVID-19 restrictions and an accident had affected its availability.
The First-tier Tribunal sided with Luxurico.
The key consideration was the company’s objectively evidenced intention at the time the vehicle was acquired, rather than simply how often it was subsequently hired.
So, can your business reclaim VAT on a car?
Before anyone starts shopping for a company supercar, it’s worth understanding the rules. Generally, businesses cannot reclaim VAT on the purchase of a car if it is available for private use, even if that private use rarely happens. However, certain exceptions apply, including cars acquired primarily for commercial hire, taxi services, driving instruction or resale by motor dealers.
VAT recovery can also be possible where a car is used exclusively for business purposes and is not made available for private use. Different rules apply to commercial vehicles, including vans, and to running costs such as repairs and servicing.
What should businesses take away from this?
The Luxurico decision highlights the importance of being able to demonstrate the genuine business purpose of a vehicle purchase. Commercial intentions should be supported by evidence, such as insurance arrangements, business records and documented restrictions on private use.
Considering purchasing a vehicle through your business?
The VAT treatment can make a significant difference to the overall cost. Speak to us before making the purchase so we can help you understand what you may be entitled to reclaim.
