In Jane Borton t/a Contract Build v HMRC [2016] UKFTT TC05224 the First Tier Tribunal (FTT) agreed that the input VAT paid on the purchase of a car by a sole trader could be reclaimed.

  • The taxpayer ran a sole-trader business in the building trade.
  • She purchased a Land Rover Freelander with the intention of using it solely for business purposes to transport tools and materials to and from building sites.
  • The vehicle was:
    • Kept at the business address (which also happened to be the taxpayer’s home address)
    • Registered with DVLA at the business address
    • Insured solely for business use
  • The taxpayer and her husband each had other cars available for private use.

The relevant legislation is the VAT (Input Tax) Order (SI 1992/3222) article 7, which says (amongst other things) that:

  • Input VAT is not reclaimable on the supply of a motor car, unless
  • It is acquired by a taxable person who intends to use the motor car exclusively for his business, and
  • He does not intend to make it available to any person for private use.

The FTT therefore had to consider whether the taxpayer intended to make it available for private use. 

The main difficulty for the FTT was whether a car acquired by a sole trader could ever be intended only for business use given that they remain the owner and controller of the car and the keys and could change any insurance policy at any time.  This had previously been discussed hypothetically by the Court of Appeal in Upton, although it was not necessary to reach a conclusion on the issue.

The FTT found that

  • The taxpayer specifically arranged and maintained insurance cover extending only to business use of the car.
  • She had a stated intention to maintain this throughout her period of ownership.
  • It is permissible for them to make a finding of fact that she had no intention of making the car available for private use to anyone, including herself.
  • Based on the evidence as a whole they were satisfied that this was the case.

The taxpayer’s appeal was therefore allowed.


Case reference: Jane Borton t/a Contract Build v HMRC [2016] UKFTT TC05224

Case referred to: The Commissioners for Customs & Excise v Upton [2002] EWCA Civ 520