The exception to the VAT on capital expenditure rules in the treatment of cars. Generally, input tax on cars cannot be reclaimed. Equally, registered trades do not account for out put tax when the car is subsequently sold, unless it is sold at a profit, when output tax must be levied on the profit element. However, there are a number of exceptions to these rules. VAT cam be reclaimed on cars:  

• Acquired new and intended to be sold ( i.e. if you are a car dealer)  
• Intended to be leased to or used in a taxi business, a self-drive hire business or a driving school      

Where input VAT on a car is recoverable, output VAT must be accounted for in the usual way when the car is eventually disposed of.  

Accessories bought at the same time as the car suffer the same treatment as the car itself, but if they are acquired and fitted after the car was acquired, the input VAT can be reclaimed, provided that the expenditure is for busines