When your company finances a vehicle, the tax treatment depends mostly on whether Revenue sees it as a commercial vehicle or a car. A van in VRT Category B or C used for business normally qualifies for a full van VAT reclaim and capital allowancesTax relief that lets a company deduct the cost of plant and machinery used in its trade from its taxable profits over time instead of as a single expense. on its full cost. A car usually gets little or no VATA tax charged on most goods and services supplied in Ireland, collected by VAT-registered businesses and paid to Revenue. back and capital allowances capped at €24,000, scaled down for higher emissions.

This guide explains VAT, capital allowances, benefit-in-kind (BIK) and vehicle registration taxA tax collected by Revenue when a vehicle is first registered in the State, whether bought new in Ireland or imported. (VRT) for vans and cars bought by Irish limited companies in 2026, and how hire purchaseA form of asset finance where the company pays for an asset in instalments, often after a deposit, and takes ownership once the final payment and any option-to-purchase fee are made. and leasing change the timing. For the finance itself, see our van finance and business car finance pages. It is general information, not tax advice. Ask your accountant how the rules apply to your company before you sign a finance agreement.

Is it a van or a car for tax purposes?

Everything else follows from this question. For VAT, Revenue treats vehicles in VRT Categories B and C, such as vans, lorries, pick-ups and crew-cabs, as commercial vehiclesA vehicle, such as a van or truck, that Revenue does not treat as a passenger car for VAT purposes.. Some N1 vehicles in Category A with more than one row of seats (four or more seats) and no BE bodywork code are also treated as commercial. Buses and minibuses with more than eight passenger seats are generally not deductible, even though they are Category C.

For BIKA taxable non-cash benefit an employee or director receives from their employer, such as private use of a company car or van., Revenue uses a separate test. A vehicle is only a van if all of these apply:

  • It is made solely or mainly to carry goods.
  • It has a roofed area behind the driver’s seat.
  • That roofed area has no side windows or seating.
  • Its gross vehicle weight is 3,500kg or less.

A vehicle that fails any of these tests may be taxed as a car. A crew-cab or a van with rear seats fitted after purchase needs care, so check the registration category and the BIK definition before you choose the model. Revenue also says a converted vehicle must meet the specifications of its new VRT category, or the conversion will not be accepted for VAT purposes.

Can your company reclaim VAT on a van?

Generally, yes. If a Category B or C commercial vehicle is used only for your company’s VAT-registered business, the VAT is deductible in the normal way. If it is used partly for private or non-business purposes, only the business-use share can be deducted. If your company makes VAT-exempt supplies, the deduction may need to be apportioned.

Can your company reclaim VAT on a car?

Most passenger cars (Category A) carry no VAT deduction. Motor dealers buying stock, driving schools and car-hire or hire-purchase providers are the main exceptions. Since 2009 there has been a partial relief: a VAT-registered business can deduct 20% of the VAT charged on buying, hiring, leasing or importing a qualifying car.

Under section 59 of the VAT Consolidation Act 2010, a car first registered on or after 1 January 2021 qualifies only if its CO2 emissions are below 140g/km. Cars first registered between 2009 and 2020 needed emissions below 156g/km. The car must also be used at least 60% for business.

Revenue’s guidance adds that the business-use test applies over two years. If you sell the car, or business use falls below 60%, within that time, part of the VAT you claimed is clawed back:

  • Within 6 months: 100% of the VAT deducted.
  • 6 to 12 months: 75%.
  • 12 to 18 months: 50%.
  • 18 to 24 months: 25%.
  • After 24 months: no clawback.

For a leased qualifying car, the 20% deduction applies to the VAT on each monthly leasing charge, under the same conditions.

Commercial vehicle VAT on hire purchase and leasing

The type of finance changes when VAT is paid. Revenue treats hire purchase as a supply of goods by the finance company when the vehicle is handed over. VAT on the full price is due at that point, and the HP agreement serves as the VAT invoice. The interest charged under the agreement is consideration for credit and is exempt from VAT, so no VAT arises on the instalments.

In practice, a company buying a van on HP usually pays the VAT at or near the start, and then reclaims it in its next VAT return. Some lenders let you fund the VAT for a short period. Check how your lender handles it, because it affects your cash flow in the first few months.

With a lease, you do not buy the vehicle, and VAT is generally charged on each rental rather than upfront. Ask the lessor to confirm how VAT will be invoiced. Our guide to hire purchase vs leasing compares the two structures in more detail.

Capital allowances on vans and cars

Capital allowances let your company deduct the cost of a vehicle from taxable profits over time. For cars, the wear and tear allowance is 12.5% a year over 8 years. Commercial vehicles such as vans and trucks that are not normally used as private vehicles fall outside the car cap, so allowances are based on their full cost.

Cars are limited to a specified amount of €24,000, regardless of the actual price, and then scaled by emissions. For cars bought on or after 1 January 2021:

  • Up to 140g/km: allowances on the cost up to the full €24,000.
  • Over 140g/km up to 155g/km: allowances on the lower of €12,000 or half the car’s cost.
  • Over 155g/km: no capital allowances.

The car bands tighten from 1 January 2027

Finance Act 2024 lowered the thresholds for expenditure from 1 January 2027. Cars up to 120g/km will get the full €24,000. Cars over 120g/km up to 140g/km will get the lower of €12,000 or half the cost. Cars over 140g/km will get nothing. Similar limits apply to lease payments on leases entered into, or first paid, after that date. If your company is choosing a car around 120 to 140g/km, the purchase date can make a real difference.

BIK on company vans in Ireland

If an employee or director can use a company van privately, the private use is taxed as BIK through payroll. The cash equivalent is 8% of the van’s original market value (OMV). For 2023 to 2026, a €10,000 reduction applies to the OMV first. Revenue says the reduction tapers to €5,000 for 2027 and €2,500 for 2028 (checked 22 October 2026). Modifications such as a fitted refrigeration unit are excluded from the OMV.

Revenue’s own worked example: a van with an OMV of €28,000, less €10,000, gives €18,000. At 8%, the cash equivalent is €1,440. If the employee pays €500 towards running costs, the taxable benefit falls to €940.

When no BIK applies to a van

The limited private use exemption applies only if all three conditions are met:

  1. You provide the van for work and the employee has to bring it home after work.
  2. The employee uses it only to travel to and from work, with no other private use.
  3. The employee spends at least 80% of their working time away from your premises.

A separate van pool exemption has its own conditions. Keep records, such as job sheets or a logbook, to support any exemption you rely on.

BIK on a company car in 2026

Car BIK is a percentage of OMV that depends on the car’s emissions category and the employee’s business mileage. In 2026, a €10,000 OMV reduction applies to cars in Categories A1 to D, and Revenue’s guidance shows an additional €20,000 reduction for electric cars. For a car with under 26,001 business kilometres, the rate runs from 15% for a zero-emission Category A1 car to 37.5% for Category E (over 179g/km). Higher business mileage lowers the rate, with the top band starting at 48,001km.

BIK matters for finance decisions. A cheaper car with higher emissions can cost a director more in BIK than a lower-emission car with a higher price.

VRT on vans

VRT is charged when a vehicle is first registered in Ireland. Since 1 July 2025, Category B vans (N1 goods vehicles up to 3.5 tonnes) pay 8% of the open market selling price, or €160 if greater, for 0 to 120g/km, and 13.3% or €266 if greater above 120g/km. Some N1 vans pay a flat €200 if they meet weight and seating conditions, and the weight threshold is lower for some electric vans. Category C vehicles pay a flat €200.

VRT is not VAT and cannot be reclaimed through your VAT return. For new vehicles bought on HP, VRT is excluded from the amount on which VAT is charged.

Worked example

A van vs a car

Illustrative example: your company buys a van for €40,000 before VAT, on hire purchase, for a technician who uses it only for work. The company pays the VAT at the start and reclaims it in full in the next VAT return. Capital allowances are based on the full €40,000, at 12.5% a year, giving €5,000 a year over 8 years.

Now suppose the company instead buys a car for €40,000 before VAT, first registered in 2026, with emissions of 130g/km and over 60% business use. It can reclaim only 20% of the VAT. Capital allowances are based on the €24,000 cap, giving €3,000 a year. If the same car were bought in 2027, it would fall into the €12,000 band, giving €1,500 a year. The director using it privately would also pay car BIK. These figures are for illustration only.

Checklist before you finance a vehicle

How Welcome Finance can help

Our van finance and business car finance pages explain how those products work, and vehicle finance covers trucks, HGVs and fleets. If your company also needs working capital, for example to cover VAT paid upfront, tell us what it needs and we’ll tell you honestly whether our panel can help, or where to apply instead. Welcome Finance is a commercial finance broker, not a lender, is not regulated by the Central Bank of IrelandIreland's financial regulator and part of the Eurosystem., and works only with companies registered in Ireland (LTD, DACA type of Irish private company under Part 16 of the Companies Act 2014 that keeps an objects clause in its constitution, limiting what it can do, and uses the suffix DAC., PLCA company type under Part 17 of the Companies Act 2014., ULCA company under Part 19 of the Companies Act 2014 whose members have unlimited liability for its debts.).