Can VAT be recovered on cars sold by a business? Why or why not?

The correct response highlights that VAT cannot be recovered on cars sold by a business primarily due to the potential for personal use. In the context of VAT regulations, businesses are allowed to reclaim VAT on purchases that are genuinely incurred for business purposes. However, vehicles, especially cars, are often subject to mixed use, where they might be used for both business and personal reasons.

When a car is acquired by a business, HM Revenue and Customs (HMRC) stipulates that if the vehicle is made available for private use, the VAT on its purchase is not recoverable. This is because the VAT system aims to prevent businesses from obtaining undue financial benefits from input tax recovery when personal benefit is available from the same asset.

Other choices may imply circumstances where VAT could be reclaimed, but those scenarios do not align with typical regulations regarding cars due to their dual-use potential. Hence, personal use of vehicles significantly impacts the ability to reclaim VAT on them, reinforcing the idea that recovery is generally not permitted.