Sorry this is probably asked a lot, but would anyone be able to advise.
I have taken on a new client who has set up a Ltd Co in 2013. However she hasn't really kept much paperwork. She's kept all receipts and invoices and has completed her own VAT returns, but she now has a VAT inspection because she has always reclaimed VAT from them. She hasn't made any income yet (buys property and sells or part ex the property to developers), but as of yet hasn't sold any due to a legal dispute.
Anyways, she's asked if I can make sure that her records are in order and it looks to me like she has claimed all VAT on all fuel receipts. She hasn't kept any mileage log (about to have a meeting to see if she can prepare one). She doesn't pay on a fuel card, its paid directly out of the company bank account.
Can the company reclaim the VAT on all Fuel receipts for a Directors car? Would I have to put a private use adjustment through?
Or secondly is it best for the company to pay the mileage allowance to the director and then claim the VAT on the fuel element (personally I think this will be more beneficial as she does a lot of miles)
Or Thirdly, can the company claim the vat on the fuel that has been paid through the company bank account, AND also pay a mileage allowance to the director for use of the car, claiming vat on fuel element? (But I would have thought that this was claiming VAT on fuel twice)
All the VAT back including on private travel so long as she is paying the fuel scale charge (Unlikely?).
Reclaim all the vat if it is only used for business purposes.
Reclaim the vat on the fuel that is business use only (ie compute the personal use as you say). You would need to have proper detailed records to get this through.
Or reclaim nothing which is what a lot of people do and claim mileage allowance in the accounts.
Putting any motor expense through the books (other than mileage) renders the car a company car and all the delights of P11D's that come with it!
The company cannot pay mileage allowance and fuel, the mileage allowance is if she is using her own car and the amount if for fuel and general wear and tear of the car so no other motor expenses can be put through. The company can pay the director a car allowance via PAYE and she can still put through a mileage claim personally to the company.
On another note, I'm wondering if her company should be vat registered, it all depends on the kind of properties she buys but if it is domestic houses then that would be exempt. Property and VAT is a complex area, even more so than motoring expenses and VAT!
Thank you Rob... sometimes you get jobs where no matter how long you stare at them, they get no clearer.
Would it be right in that if she can provide detailed mileage records from her diary etc, that if we go down the mileage allowance route, all fuel that has been paid directly from the company bank account should go straight to the Directors Loan and claim no VAT.
Then we can create the mileage allowance for each month and reclaim the VAT on the fuel element only.
If however, the mileage claim came to say £500, but I have already posted say £300 of fuel against the DL, does the company still pay her the £500 or £200 (£500-£300)?
The registration I'm going to get her to clarify with the VAT inspector!
Hi Gill,
yes that should work. reverse all the fuel entries including the vat and dump the total debit to the DLA. So in your example the DLA will now be £300 debit. Calculate the mileage allowance at 45p per mile (first 10,000 miles) and debit travel and credit DLA (£500 in your example). Now DLA is £200 credit and this can be paid. Obviously at this stage there is an over claim of vat so you would want to bring this to the attention of the inspector.
It would be interesting to know what types of properties she is buying, if they are domestic they would normally be exempt so she couldn't claim any vat back on renovations, however there was a rule a few years ago that if the property had been empty for a few years (two I think) then the vat on renovations was reduced to 5%. I'm not sure how it works, whether she would make a claim for the difference between the 20% charged and the 5% rate. I must admit I try to stay clear of properties as they are a bit of a nightmare, though probably ok once you get your head around the different types of property and the different rules! Maybe it is a good niche area to get into?! Anyway good luck with it...VAT inspections seem to be raising their ugly heads again
Thanks very much Rob. I think that is going to be the best option for her. Obviously means that she has overclaimed vat at the moment but its wrong anyway as shes not put fuel scale charge through either. She doesnt understand what limited companies are and has put a multitude of personal expenses through.
Be nice to get a lovely simple job one day
Hi Rob,
Would you or anyone else be able to advise on something else .
The director had no understanding of what forming a company was, and so has used the company bank account to pay for all invoices etc including those for personal use.
Some of these invoices are in the company name and some are in just her name. She's the sole director and has no staff.
For personal expenses in her name these are getting posted direct to DLA, with no VAT reclaimed.
For expenses in the company name and are genuine business expenses I post as normal, claiming the VAT as normal
For those expenses that are in just her name, and are business expenses, would it be necessary to post the transaction to the DLA and then put the expense on an expense claim form? If I had to do this, can the company still reclaim the VAT (for example, she bought software for the business in her name and home address, paid it through company). The business is run from home. Is it ok to put this direct to the expense and reclaim the VAT as normal or put through DLA and reclaim VAT from expense form (or not reclaim at all)
For those expenses which are in the company name, but have an element of personal use, should they be posted as normal, and then put a journal through transferring the personal element to the DLA and reducing the input VAT?
