Hello, would anybody be able to tell me, I have been looking but keep getting mixed information, a client has bought a Mutt 125 mongrel motorcycle for commuting to work. Can the vat be claimed on this?
As ever the devil is in the detail and there isnt much here.
Just commuting? No.
But if there is more to this, maybe.
Sole trader? Limited? What else is the bike used for? What trade?
Other problem - if we answer, then how does that solve your getting mixed information as surely we are just adding to it? (that devil is around again, or perhaps just his advocate )
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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
Does he mean travel to and from his office (which could be his home) to different sites or just from home to one main office?
From what I've read VAT can be reclaimed on company motorcycles (assuming he is not on the flat rate schemw) but he has to pay tax on it as a benefit in kind (assuming that as a director he is on PAYE)
-- Edited by pictures on Monday 18th of September 2017 02:47:56 PM
Hi Julie
Thats why I asked for his trade as there still isnt much to go on.
Hi Nikole
VAT is reclaimable BUT ONLY the proportion that is business related. So if it is pure commuting then none is recoverable, but Julie raises a good point on the travel.
If there is a mix then some can be claimed, but then its fun and games with capital allowances (will need to be restricted to the business use)and a BIK needs to be processed (they will need to register for PAYE if they havent got one)
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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
Joanne - More than one accountancy website states that the rules changed for company motorcycles and unlike cars they are now considered to be assets so full VAT can be claimed plus capital allowances
BUT
I can't find the source for this information and I don't like 2nd hand info.
Hi Julie Yes motorbikes are not classed as cars for VAT. But even if you lump it under commercial use the full VAT reclaim is, as I understand it, only available if the personal use is incidental. Ive not got the specifics from the VAT act. Sorry but just not got the time at the mo, although the nosey me might get the better of me and find it later. Its just from Nikole's earlier post the use doesnt sound to be incidental. Sounds like he wanted a bike so he bought it with the company money - but will await an update from Nikole.
edited out cap allowances (was. Racking up after all! (Sorry, it's a limited!!)
-- Edited by Cheshire on Tuesday 19th of September 2017 07:09:58 AM
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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
A motorcycle is not a car, so it is not covered by the same all-or-nothing guidance on input tax.
But, if there is to be some element of non-business use, e.g: home to office commuting, then input tax will only be allowable in part. Only if non-business use is de minimis can you claim input tax in full.
An alternative is for the director to buy it personally, and then claim a mileage rate for business miles.
VAT Act 1994, s26 is the place to start in the legislation. Also, read this: www.gov.uk/hmrc-internal-manuals/vat-input-tax/vit51500
Or use the Lennartz accounting mechanism? What a pain!
Edited to add - unlikely to be an option, especially in light of the later legislation (VNLTO case)
Hi Joanne
I had never even heard of the Lennartz mechanism until you mentioned it and so read up on it to get a better understanding, which I wish I hadn't as it must be a massive amount of work trying to implement it after input VAT has been claimed.
Do businesses actually use it?
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Doug
These are only my opinions of how I see things and therefore should not be taken as advice
Lennartz was popular with charities for a while, as it allowed full input tax recovery, and then adjustments each year for ten years.
Once HMRC realised why it was so popular, they changed it, and only allowed partial input tax recovery on purchase.
And, yes it is a lot of work.
Lennartz was popular with charities for a while, as it allowed full input tax recovery, and then adjustments each year for ten years. Once HMRC realised why it was so popular, they changed it, and only allowed partial input tax recovery on purchase. And, yes it is a lot of work.
Thanks Les
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Doug
These are only my opinions of how I see things and therefore should not be taken as advice
hi Doug
I read the entire vat guide 700 (borrrrring!) when I was setting up a business years ago and waiting for shipments from China, before I got into this gig. I then started reading up all the vat updates and the HMRC import guides. I think Lennartz was the first or second draft case I read. Can you imagine my head afterwards....ever so slightly battered. Weird how things pop back into your head sometimes!!
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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
In general, if the Mutt 125 Mongrel motorcycle is used exclusively for business purposes, VAT on its purchase can usually be claimed. However, if it's also used for personal use, only the portion of VAT related to business use can be claimed.
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