Buying car through company & what does "VAT qual" mean?

[philcray]

Hi

I am the owner of a VAT registered Ltd Company and employed by that business as a director, so far I have just bought my cars out of my own hard earned cash. However, in simple terms, is it ever financially beneficial to buy a car through your company rather than just paying for it yourself?

I am thinking of a lease deal and can see benefits in taking the cash out of the business to pay the deposit and monthly payments, hence avoiding paying corporation tax and dividend tax on that money. Also I understand you can claim back a % of the VAT on the lease payments?

The downside is that you are then taxed as having a company car. While my heart would like a Range Rover I am probably looking at an E class E250 cdi estate so something with a low'ish to mid emissions level so not too onerous tax wise hopefully.

Has anyone any experience of the pro's & con's of doing this?

Secondly what does VAT Qualifying mean, can I claim back that VAT if I buy such a vehicle?

Many thanks for any feedback

Phil

[Ash 996 GT2]

I am no expert, however, when I was buying the GT2 I was informed that I would have to pay 40% tax on the original value, over 120k.

I think that is yearly, someone, I am sure, will come along and correct me.

Needless to say, I paid for it out of my own pocket.

[philcray]

Thanks Ash, as you say the tax element is based around the original price of the car when new (so buying an older car has no benefit from that side) along with the emissions level - this puts me off the FFRR as I would like to buy a 3 year old for about £35k, but would then get taxed for a £65k+ value with high emissions.....

I think the company car deal works best when buying new (or nearly new) and low emissions....

[richtvr]

It depends on what your business does, for example I am currently in the process of buying a new xf. The way I am going around the vat and tax is:

As I have a paint shop I'm going to paint the car and have it down as a demo vehicle so I can claim all the vat back and as it's a demo car and anyone can drive it I do not get taxed. I'll fiancé the car so I get tax relef on the interest and depreiation write off. At the end of the 3 years I'll sell the car to my friend and a rock bottom price + vat as it's "damaged" and do the same again. Thus not giving 500 pound a month away for nothing and having a 5 k tax bill every year. My friend has done the same with his Lamborghini as he owns a engineering firm that build engines!

[Kevin VRs]

IIRC Only certain types of vehicles are 'VAT Qualifying'. If you were to purchase one of those then you can trat as normal VAT rules. If not then no VAT can be reclaimed.

I am not sure on the rules of leasing or HP, you need to talk to your company accountant or auditor.

[Tyre Smoke]

A VAT qualifying vehicle is a vehicle that has been purchased from new by a VAT registered company and qualifies for the VAT to be reclaimed in certain circumstances. Your company car that is used for both business and SDP is not one of those circumstances.
Buying a VAT qualifying vehicle as a taxi (for example) that is used solely for business and nothing else means you can reclaim the VAT.

[Tyre Smoke]

richtvr said:

It depends on what your business does, for example I am currently in the process of buying a new xf. The way I am going around the vat and tax is:

As I have a paint shop I'm going to paint the car and have it down as a demo vehicle so I can claim all the vat back and as it's a demo car and anyone can drive it I do not get taxed. I'll fiancé the car so I get tax relef on the interest and depreiation write off. At the end of the 3 years I'll sell the car to my friend and a rock bottom price + vat as it's "damaged" and do the same again. Thus not giving 500 pound a month away for nothing and having a 5 k tax bill every year. My friend has done the same with his Lamborghini as he owns a engineering firm that build engines!

That sounds very suspect to me. I think HMR+C would love you should they descend with a tax inspection.

[khushy]

Motorcycles are VAT qualifying - as its treated as an asset - you are still taxed on the BIK - but the VAT BACK is nice :-)

[Kevin VRs]

richtvr said:

It depends on what your business does, for example I am currently in the process of buying a new xf. The way I am going around the vat and tax is:

As I have a paint shop I'm going to paint the car and have it down as a demo vehicle so I can claim all the vat back and as it's a demo car and anyone can drive it I do not get taxed. I'll fiancé the car so I get tax relef on the interest and depreiation write off. At the end of the 3 years I'll sell the car to my friend and a rock bottom price + vat as it's "damaged" and do the same again. Thus not giving 500 pound a month away for nothing and having a 5 k tax bill every year. My friend has done the same with his Lamborghini as he owns a engineering firm that build engines!

This is OK provided you can follow a few rules such as:

Leave the car at the business location every night and all weekends
Keep a log of all drivers including times/locations driven

If not then you are at a big risk of being charged with tax evasion.