Readers’ forum: Racing expenses

We have a client who has purchased an old car had it restored and wishes to use it as a racing car. They have three purchase invoices:

• Purchase of the car itself – no VAT charged.
• Restoration to road-worthiness – VAT charged.
• Race preparation – VAT charged.

Initially we were told that the car would be raced as part of gaining publicity press coverage etc. It was regarded as marketing and promotion. We are now told that on some occasions clients will be invited to attend the races and possibly even be allowed to drive the car. I regard this as client entertaining.

My thoughts are that the VAT on the restoration cost would not be recoverable as effectively part of the capital purchase cost of the car.

However what about the race preparation costs? If it were pure marketing...