VAT Recovery on Aircraft

Mar 17, 2023
Author: David Cairns
David is our senior tax partner and has extensive knowledge of business and personal taxes. David specialises in providing international tax advice to our clients.
Vat Recovery Aircraft
We have helped a number of businesses and individuals with the purchase of aircraft determining the best way to make the purchase in order to recover the VAT and to manage personal and corporate taxes.

It’s fair to say HMRC can be skeptical about the position, but they can’t ignore the legislation and case law.  They will be very interested to see who the pilot is and whether they hold a PPL, CPL or ATPL.

When buying an aircraft you should consider the tax rates.  If you take the money out of your company to buy the aircraft personally, the tax rate could be high after paying NI and PAYE, getting on to around 53.5%!

You could look at the company buying it.  If the aircraft was an executive perk or where there wasn’t any economic business activity, it’s unlikely that the company can reclaim the VAT.  You could be taxed 20% of the market value of the aircraft  plus your share of the running costs if the company pays them. The company should be able to claim a tax deduction for these costs as remuneration, this isn’t cheap but it is more tax efficient than funding it through your own salary or dividends.

On the other hand, if the purchase is made for genuine commercial economic business activities and business trips, the VAT can be recovered and there will be no tax benefits. Your access to the aircraft needs to be managed and probably rented to you at full commercial rates, unless of course, you and others are just using the aircraft for business use e.g. meetings abroad so that there are no tax problems.  The aircraft logbook will always set out where the aircraft has been and who was the pilot.

If there is mixed use, so a hybrid method of taxation will need to be worked out.

When buying an aircraft, you must take the above into consideration to ensure you are paying the least VAT possible, whilst managing both personal and corporate taxes. We are able to help you choose the best route for your circumstances.   Of course for aircraft you can apply the same position to boats.


More from our tax experts

You can find all of our latest tax articles and tax resources here.

If you are looking for advice in a particular area, please get in touch with your usual Hawsons contact.

Alternatively, we offer all new clients a free initial meeting to have a discussion about their own personal circumstances – find out more or book your free initial meeting here. We have offices in Sheffield, Doncaster and Northampton.

Free initial meeting

David Cairns

Tax Partner, Northampton

Related Content

Succession Planning for Farms

Have you thought about succession and the long-term plans for your family farm? As agriculture makes up the highest concentration of family businesses passed through the generations, it is no surprise that succession is a key issue and is something farmers need to...

UK company size thresholds to increase

To cut complexity and burdens from legislative reporting requirements, the thresholds for company sizes in the UK are being increased by 50%. Following the Spring Budget, it has been announced by the Prime Minister Rishi Sunak that the company size thresholds will be...

The tax year ends on 5th April each year, why is this?

Well you can blame the Romans, especially Julius Caesar and Europe. Back in 1582 the Pope Gregory X111 commanded the change from the Julian calendar as there was a problem.  It ran for 30 or 31 days for 11 months and it was only February that had 28 days (29 every 4...