Ok - help here much appreciated as I have had a complete block on this one!
Director of a 'one man band' Ltd Comp wants to buy a car and put it through the business. He is always travelling between clients. (IT guy)
He says it will be 100% business use. (He already has a family car which he is keeping) He plans to put some advertising of his company on this car as well. Works from a home office, so is unable to 'lock' it away when not working.
So can he :
i) Claim the VAT back on the purchase, if invoiced to the Ltd Comp? (He does not want to go down the leasing route)
ii) Avoid an P11D tax, as he assures me he will not use it for personal travel at all.
I thought I read somewhere that cars can have the VAT on purchase claimed back, as long as it is 100% for the business. But know I am not so sure.....
You say IT guy, are we talking IT contractor or a PC builder?
If the former the rules are changing around travel plus there is always the IR35 issue and current crackdown on use of brollie companies.
If the latter why is he buying a car rather than a van?
Just on my way out at the min but looking forwards to playing with this one when I return later.
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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.
If as you say it is to be used 100% for business, then yes you can reclaim the VAT assuming the car is in the name of the company.
However,
Trying to prove that a car, which is parked outside of a residential premises, is used solely for business, unless it is a taxi/hearse, will be tricky.
If it were to be locked away on commercial property then yes, claim would more likely than not be successful.
Should I be a VAT inspector, I would want to investigate a claim you mention in your OP.
Aside from installing a tracking device into the car, and matching it up against every invoice issued from being on the road, or receipt from purchases made whilst on the road, I can't see how you can prove it is never used for personal travel.
If as your posts suggests, the car will only be used for business, then why not make the claim?? It would be legal, the issue is proving it.
-- Edited by abacus12345 on Saturday 9th of April 2016 09:20:02 PM
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Johnny - Owner of an overly-active keyboard.
A man who can read, yet doesn't, is in no way wiser than a man who can't.
Doubt HMRC would accept a car as 100% business if is parked outside their house.
But as said above if client made aware of the risk that will be treated as private use then claim. It will then be up to the client to prove their is no private use which would be difficult to prove.
Couple of things come to mind here
1) Proving it is purely a company company and that there is NO personal use - that you could struggle with and there would be a double whammy of penalties if you claim the VAT back and dont include on the P11D.
2) Consider the existing case law.
If the car is 'available' for private use even if there is not the intention for private use then HMRC could have a case and have won cases on this basis.
But there is also case law whereby a Ltd company purchase a car for a Director, showed by way of a Board Resolution that the car was for business use only and crucially that that it would be a breach of an employee's terms of employment to use it for private purposes.
In your case, matters are not helped by him being the sole Director, with presumably no contract of employment; the reasoning behind buying an estate car rather than a van (could be considered dubious at best); the fact he is the only employee therefore it cannot be viewed as a pool car; the fact that it cannot be left overnight and at weekends at a separate place of work, the fact that HMRC would view that the car is therefore 'available' for private use. Consider how the car is being paid for and what the insurance documents also say - if there is ANY private use mentioned on that then there is no input VAT and there will be P11D implications.
Other minor points perhaps - who has use of the personal vehicle besides the director? (and do they use it for work say at weekends, when he might not be using his company car?) Where does he keep all his stock for his PC builds?
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Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
To concur, point 1 of Joannes post, a penalty like that, to a small business, could be a real game changer for his business - it could end it. I'm impressed the guy makes a good living building computers, I know a few people who have been in that trade, they aren't anymore. Changes in tech, lower costs to buy off the shelf etc. Suppose he could claim the VAT, then liquidate...I didn't really say that..
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Johnny - Owner of an overly-active keyboard.
A man who can read, yet doesn't, is in no way wiser than a man who can't.
