Personal Contract Hire - Used for Business - Reclaiming VAT

[FordMan1]

All,

I took out a personal lease in February 2014 for a two year term.

The deal is a PCH so no balloon payment or option to purchase at the far end.

The car is used for work and any mileage covered is reclaimed through standard employer procedures at the rate of 14ppm.

I believe I am correct in saying that I can then claim half the vat back on the difference in level between the 14ppm offered and the HMRC rate of 45ppm.

There are conflicting theories in the office as to what one can and cannot claim when they have a personal contract hire car utilised for business purposes.

Ideally I am looking to establish a full list of everything that can be reclaimed and how to go about doing so without incurring the exorbitant costs of an accountant.

For the avoidance of doubt, I receive a car allowance and I also use the car for personal purposes.

A one stop thread to answer these points would be great and I couldn't seem to find much on here to assist.

Thanks in advance.

I took out a personal lease in February 2014 for a two year term.

The deal is a PCH so no baloon payment or option to purchase at the far end.

The car is used for work and any mileage covered is reclaimed through standard employer procedures at the rate of 14ppm.

I believe I am correct in saying that I can then claim half the vat back on the difference in level between the 14ppm offered and the HMRC rate of 45ppm.

There are conflicting theories in the office as to what one can and cannot claim when they have a personal contract hire car utilised for business purposes.

Ideally I am looking to establish a full list of everything that can be reclaimed and how to go about doing so without incurring the exorbitant costs of an accountant.

For the avoidance of doubt, I receive a car allowance and I also use the car for personal purposes.

A one stop thread to answer these points would be great and I couldn't seem to find much on here to assist.

Thanks in advance.

[Eric Mc]

Are you a VAT registered business?

If so, how come you are receiving a "car allowance"?

[rfoster]

In fact, are you VAT registered at all? If you're not, then no, you can't claim any VAT back. You would need to be personally VAT registered too, not your company, to claim any VAT back on an agreement in your own name I expect.

[FordMan1]

Sorry guys, I should have clarified, I am merely an employee at a large firm and not self employed.

[CRB14]

You can claim the tax relief on the difference between 45p/mile (first 10,000 business miles) and the 14p/mile that you get paid. You'll have to do this in your end of year self assessment. If you don't do one yet you'll need to. Some companies send off the details for you though. Be mindful that the mileage rates only apply to business miles and can't be claimed against any locations that you are expected to be at for 2 years or more (as this then becomes your permanent place of work).

In terms if VAT...no, afraid not.

[FordMan1]

CRB14 said:

You can claim the tax relief on the difference between 45p/mile (first 10,000 business miles) and the 14p/mile that you get paid. You'll have to do this in your end of year self assessment. If you don't do one yet you'll need to. Some companies send off the details for you though. Be mindful that the mileage rates only apply to business miles and can't be claimed against any locations that you are expected to be at for 2 years or more (as this then becomes your permanent place of work).

In terms if VAT...no, afraid not.

Thanks for that, much appreciated.

From speaking to some of the senior guys, they inferred that they were in a position where they claimed tax relief on monthly cost of the car and also any VAT on any maintenance of the vehicle, whether taken as part of the package of the lease or as stand-alone purchases such as tyres, etc.

It shouldn't be confusing and in reality it probably isn't, however, various colleagues seem to do it differently!

[rfoster]

On a business contract hire agreement, a vat registered entity can reclaim:

50% of the finance element of the monthly rental
100% of the service element of the monthly rental (i.e. the part that covers maintenance and servicing)

OR
100% of the VAT on the whole rental for commercial vehicles, or cars that are not used for any personal mileage at all.

But if you're not VAT registered, you can't claim any back.

[Eric Mc]

FordMan1 said:

Sorry guys, I should have clarified, I am merely an employee at a large firm and not self employed.

Ordinary employees can NEVER reclaim VAT on any costs they incur - even if the costs are incurred wholly, exclusively and necessarily in the carrying out of their duties as employees.

If they DO have to pay out of their own pockets for employment related costs, they should normally be reclaiming these costs directly back from their employers. In that case the EMPLOYER might be able to reclaim VAT on those costs.

If, for whatever reason, the employer does not reimburse their employees for costs the employees incur (which would be awfully mean of them), then the employee MIGHT be able to obtain INCOME TAX (not VAT) relief on some of those costs.

[theboss]

FordMan1 said:

CRB14 said:

You can claim the tax relief on the difference between 45p/mile (first 10,000 business miles) and the 14p/mile that you get paid. You'll have to do this in your end of year self assessment. If you don't do one yet you'll need to. Some companies send off the details for you though. Be mindful that the mileage rates only apply to business miles and can't be claimed against any locations that you are expected to be at for 2 years or more (as this then becomes your permanent place of work).

In terms if VAT...no, afraid not.

Thanks for that, much appreciated.

From speaking to some of the senior guys, they inferred that they were in a position where they claimed tax relief on monthly cost of the car and also any VAT on any maintenance of the vehicle, whether taken as part of the package of the lease or as stand-alone purchases such as tyres, etc.

It shouldn't be confusing and in reality it probably isn't, however, various colleagues seem to do it differently!

Are these 'senior guys' also employees or could they be contractors operating limited companies?

As others have said, you can't reclaim VAT in any way... although businesses are able to reclaim half the VAT on leases for vehicles which are used by employees privately, which may be how some confusion has arisen.

What you most definitely can do, is claim the tax relief on the difference between the HMRC approved mileage rate and what you are actually paid. This is £0.45/mile for the first 10,000 and £0.25 thereafter.

This means that if you did 15k business miles and were reimbursed at £0.14/mile you received £2100 in mileage payments, but HMRC would grant you tax relief on £5750.

By reclaiming tax paid on the difference (£3650) this would be worth £730 -1460 depending on your overall income level / tax rate.