VAT and personalised number plates

July 3rd 2024

You’ve purchased an expensive personalised number plate which included VAT.  A business associate has told you that because the registration number has a connection with the business, you can reclaim the VAT.  Are they correct?  Bruce Currie takes a closer look below.

VAT claim allowed
Unlike VAT paid on the purchase of cars, there’s no block on reclaiming VAT for personal registration numbers. However, to do so, it must be incurred on a cost which is used for business purposes and linked to making Vatable sales.

However, HMRC takes the view that private motive and enjoyment prohibits any VAT reclaim, particularly for luxury or superfluous items.

A business purpose?
There’s no statutory definition of “business purpose” so the meaning must come from court decisions. These say that business purposes are something more than just being commercially beneficial. In fact, there must be a clear connection, i.e. a direct and immediate link between the trading supplies made (the core activity) and the expenditure. Standard registration numbers give away the age of a vehicle. Using a personalised registration can to a degree disguise this and give the appearance that your business is doing well. This can be important for promoting your business.

Direct link to the business
The most effective argument to justify reclaiming VAT is where the registration number can be seen to advertise your business. The number must be readily identifiable to the public as being associated with your business’s trading name. Keep a record of the reasons that support your decision to purchase the number.

To reclaim the VAT your business must own the rights to the registration. Therefore, it should appear in its accounts and other records as a business asset. If you paid for it personally, the business should reimburse you.

Determining the true purpose behind acquiring an item which could also have personal benefit comes down to a subjective interpretation of the facts. Remember that at a tribunal the taxpayer must show that HMRC acted unreasonably when denying the input tax deduction. Be ready with your convincing arguments in the event of an HMRC enquiry.

VAT paid on the purchase of a personalised vehicle registration can be reclaimed if it isn’t bought for reasons of private indulgence, and it clearly promotes the name of your business. HMRC considers each case on its merits, so keep a record of why you think a registration promotes your business in case of a challenge.

If you need advice about VAT and the implications your business, as well as further VAT advice, please do not hesitate to contact the team at JRW Hogg & Thorburn.