As a newly VAT registered small business, I have been out and purchased a van on finance. I pick the thing up tomorrow and have been handed a copy of an invoice which is made out to the finance company from the dealer.
My understanding is that in order to claim the VAT back the invoice should be made out to myself as the buyer. The salesman has assured me that I can still claim the VAT back but I'm not so sure.
There is a small box where the dealer signs to say that the input tax has not and will not be claimed in respect of the goods sold on this invoice but will this be sufficient for HMRC purposes.
As I've taken out finance on it, I appreciate that I am not the legal owner until all payments have been made in full so I'm confused now as to where I stand with claiming the V.A.T back.
I've paid the VAT as the deposit and then the finance is for the price of the Van.
My accountant is out for the evening and so I need to make sure I am not going be unable to claim the VAT back before I pick it up tomorrow, so your advice would be gratefully received.
This sounds to me as though you have entered into a finance lease rather than Hire Purchase
The vehicle has been sold to the finance company and you need a seperate invoice from the finance company to your business in order to claim the VAT (that you have already paid) on the purchase (you cannot claim VAT on an invoice to another business, only they can do that).
The ownership is a case of substance over form in that you are taking on the risk and reward of ownership (my assumption is that this is a finance, not operating lease where you retain ownership at the end of the term).
Have you got more documents from the finance company? You need to determin whether you have entered into a finance or operating lease with them (do rentals include an element of VAT?).
As you have identified, really you need for your accountant to take a look at the paperwork to determin what sort of finance agreement you have entered into.
HTH,
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Thanks for replying, I'm due to pick this van up tomorrow and I'm starting to get worried. My accountant is not calling me back. When I asked for the invoice, I was given a photocopy of an invoice from the Dealer to the Finance company and attached to it is the terms of the "conditional sale agreement". I've been told by the dealer that the vehicle is mine after I have made 60 payments. There is nothing to pay other than these set equal monthly payments.
I was also told that the finance company cannot include VAT into the agreement and so I would have to pay this up front. Basically the finance is just for the balance. However, the dealer is charging the finance company VAT.
I'm wondering whether I will get an invoice from the finance company instead? All I have so far is a receipt for the amount I've paid which is equivalent to the VAT.
the vehicle is sold by the dealer to the finance company who then leases the vehicle to you for a set period.
Normally at the end of the period there will be some sort of final payment when ownership of the vehicle transfers to youself.
There is very little difference between a finance lease and HP and in both cases you can think of the vehicle as your own in everything but being able to sell it.
The sort of lease that is very different is an operating lease which is more akin to a rental agreement than a loan and the finance company would charge VAT on the rentals.
In substance rather than form substantially all of the risk and reward of ownership transferred to you when you took out the lease. As such the vehicle will appear in your books rather than simply being an expense as would have been the case if it had been an operating lease.
That the dealership took the VAT and arranged finance for the capital does create a kunundrum in that the dealership will pass the VAT on to HMRC on the sale which only the leasing company could reclaim as the vehicle was sold to them but they did not pay the VAT on it, you did by way of a deposit.
The actual paperwork must reflect that you paid the deposit to the finance company who paid for the vehicle inclusive of VAT
The dealership takes the VAT from you, passes that to the finance company (probably only on paper rather than a physical transfer) who gives it back to the dealership who passes it on to HMRC and will have nothing that they can claim against that as they are the starting point of the chain.
The finance company will recognise the car from the dealership and the VAT from you. They will pass the capital and the VAT to the dealership and reclaim the VAT through their VAT return.
You will (should) get documentation from the finance company including the VAT that you have already paid which you can then use in order to reclaim the VAT from HMRC.
Basically the money will have done a big circle from you to the dealership to the finance company to the dealership to HMRC and you reclaim it from HMRC.
The core of the issue here is that the finance company that has purchased the vehicle from the dealership needs to issue you with the correct form of agreement in order for you to be able to reclaim the VAT.
At the moment it sound as though your documentation is incomplete so it would be a good idea to speak with the finance company in the morning to query when you will receive the proper agreement from them.
I'm afraid that I'm answering a little blind here as I don't know the details of the documentation that you already have.
For clarification though, just to emphasise that the dealership has actually done nothing wrong. You chose a vehicle which you purchased through a finance company so they sold the vehicle to the finance company.
The paperwork that you really need is that between yourself and the finance company.
Hope that the above makes sense.
I appreciate that when one only has half of the documents that they need but have already parted with a large chunk of money things can be a little worrying.
Speak with your accountant in the morning preferably before speaking with the finance company and I'm sure that they will be able to alleviate your worries.
kind regards,
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
