Do you have to be VAT-registered to lease a van?

Van leasing can be a great way to access reliable and cost-effective business transport. It also comes with certain tax benefits too. Whether you’re a limited company or sole trader, your business will likely rely on a van as part of its operations.

However, you might be wondering what the rules are for leasing a van for business use. Can your business apply for a van lease, does it need to be VAT-registered, and how do you claim VAT back on a van?

Unfortunately, there’s no straightforward answer, as a business needs to meet certain conditions in order to be eligible. Let’s explore the impact that being a VAT-registered business has on these tax benefits and whether this affects your eligibility for van leasing.

Does VAT apply to van leasing?

VAT applies to many aspects of leasing in general, but things are slightly different if your business is VAT-registered. Van lease payments are treated as a tax-deductible expense. If you choose to lease a van, 100% of the VAT can be claimed back. The business must be VAT-registered for this to apply. If you’re a non-VAT-registered business, you won’t be able to take advantage of these tax savings.

Do you have to be VAT registered to lease a van?

You don’t have to be a VAT-registered business to enter into a van leasing agreement, and there are still a variety of van finance options available. But it is worth bearing in mind that you will not be able to claim any VAT back over the term of the van lease.

Who pays the VAT on a business lease van?

Businesses (or individuals if self-employed) who enter into a van lease agreement will be liable to pay VAT where applicable. The amount of VAT that can be reclaimed depends on the amount of business mileage covered. For example, if 90% of van mileage is classed as business miles, then 90% of the VAT paid can be reclaimed. Any personal miles must be tracked closely and are not tax deductible.

Can you claim back VAT on a lease van?

As mentioned previously, VAT-registered businesses can claim 100% of the VAT on vans. However, this is only achievable as long as:

• The lease van is classed as a ‘commercial vehicle’ by the HMRC.
• Your business is VAT-registered.
• The van is used for business purposes only (any personal use will be subject to VAT).

The majority of commercial vehicles, including electric vans and lease pick-ups can reclaim a large percentage of VAT as long as they meet the above criteria.

Can I avoid paying VAT on a lease van?

Although many businesses won’t be able to avoid paying VAT on vans altogether, van leasing can be an excellent way for VAT-registered companies to limit the amount they pay. If you avoid any personal use of a business leasing van, it should remain tax deductible.

If I’m not VAT registered, what is the best van finance option for me?

The best way to finance your lease van depends on your business needs. We suggest comparing any cheap van lease deals and considering your monthly budget, inclusive of any VAT. The type of van you require is also important, alongside whether you’re interested in ownership or want to hand it back at the end of the agreement.

This article should be used as a guide only. ‘Do you have to be VAT-registered to lease a van?’ is for information only and is subject to change. Information is supplied by a third party, and Synergy accepts no responsibility for errors in the data. Please contact us if you wish to receive a quotation. Eligibility criteria, terms & conditions apply. You will not own the vehicle. Vehicles are subject to availability. You should verify this information with your tax adviser or accountant before proceeding with your contract.