Business leasing without paperwork - Is it an offence?
Discussion
So a comment in the leasing deals thread some time ago caught my eye and as it cropped up again recently I'm interested...
The comment was essentially that one could apply for a business lease deal (assuming that one is genuinely eligible i.e. business owner), make the payments from your personal bank account and never mention it to HMRC at all in regards to your business.
Does anyone know for sure?
Original thread link
The comment was essentially that one could apply for a business lease deal (assuming that one is genuinely eligible i.e. business owner), make the payments from your personal bank account and never mention it to HMRC at all in regards to your business.
gizlaroc said:
The lease company know nothing other than the lease is to the company, it is up to you to then to put the paperwork through to write it off against profits, claim 50% of the vat back (100% if it is only ever used for work) etc.
Ask yourself this, what if you have taken a lease car on for an employee, that employee doesn't want it, you are entitled to lease it out again, as long as you pay the IR the vat if you are vat registered.
You could lease it out at a loss, but that would look suspect.
Get your company to lease it to you as a private individual, exactly the same rate as you are paying the lease company.
As a company they pay the vat on the lease, and they charge vat again to you, as an individual you can't claim the vat back, but as it was no longer a company car you have no BIK tax to pay either.
Or simply never do anything with the paperwork, just take over the payments, pay the deposit and the monthlies (which include the vat) and who would ever know?
I don't think the IR would even care, I asked this a while back when I wanted to lease a car and the lease company stopped leasing to private individuals, the girl was quite helpful and said she couldn't see a problem setting it up with the company, said it was no different to the company acting as guarantor really.
You need to seek some advice from your accountant, see what they say.
My first one was a bit twitchy about it, the second one seemed to think it was fine, I was not diddling the tax man, just using the company to get a better price.
My question is, is this legal? Or would you be committing some kind of offence (fraud?) in doing so?Ask yourself this, what if you have taken a lease car on for an employee, that employee doesn't want it, you are entitled to lease it out again, as long as you pay the IR the vat if you are vat registered.
You could lease it out at a loss, but that would look suspect.
Get your company to lease it to you as a private individual, exactly the same rate as you are paying the lease company.
As a company they pay the vat on the lease, and they charge vat again to you, as an individual you can't claim the vat back, but as it was no longer a company car you have no BIK tax to pay either.
Or simply never do anything with the paperwork, just take over the payments, pay the deposit and the monthlies (which include the vat) and who would ever know?
I don't think the IR would even care, I asked this a while back when I wanted to lease a car and the lease company stopped leasing to private individuals, the girl was quite helpful and said she couldn't see a problem setting it up with the company, said it was no different to the company acting as guarantor really.
You need to seek some advice from your accountant, see what they say.
My first one was a bit twitchy about it, the second one seemed to think it was fine, I was not diddling the tax man, just using the company to get a better price.
Does anyone know for sure?
Original thread link
I don't think there's anything 'illegal' in that....however it's worth noting that leasing companies don't allow sub-letting of vehicles on their lease agreements (not that they would know, I suppose.) The company leasing the vehicle would still have to prove insurance for the vehicle and they direct debit must also come from their account.
Only problem comes if you decide to leave the employment of your company - will you continue to sub-lease the vehicle from them? If not they're having to pay for a car they don't want or need.
In truth there's no reason why you couldn't just take it as a company car and make a monthly contribution equal to the monthly rental to the company. This would probably cancel out any company car tax you would be liable for in the first instance, and this would keep the whole thing above board.
Only problem comes if you decide to leave the employment of your company - will you continue to sub-lease the vehicle from them? If not they're having to pay for a car they don't want or need.
In truth there's no reason why you couldn't just take it as a company car and make a monthly contribution equal to the monthly rental to the company. This would probably cancel out any company car tax you would be liable for in the first instance, and this would keep the whole thing above board.
rfoster said:
I don't think there's anything 'illegal' in that....however it's worth noting that leasing companies don't allow sub-letting of vehicles on their lease agreements (not that they would know, I suppose.) The company leasing the vehicle would still have to prove insurance for the vehicle and they direct debit must also come from their account.
Only problem comes if you decide to leave the employment of your company - will you continue to sub-lease the vehicle from them? If not they're having to pay for a car they don't want or need.
In truth there's no reason why you couldn't just take it as a company car and make a monthly contribution equal to the monthly rental to the company. This would probably cancel out any company car tax you would be liable for in the first instance, and this would keep the whole thing above board.
I think you may have misunderstood the suggested scenario.Only problem comes if you decide to leave the employment of your company - will you continue to sub-lease the vehicle from them? If not they're having to pay for a car they don't want or need.
In truth there's no reason why you couldn't just take it as a company car and make a monthly contribution equal to the monthly rental to the company. This would probably cancel out any company car tax you would be liable for in the first instance, and this would keep the whole thing above board.
There is no subleasing going on, the business details are simply used as a vehicle to qualify for a business only lease deal. The car would be registered to the individual (I presume) and payments made from the individual's account. As far as the ltd company is concerned the car doesn't exist.
Gotcha - the scenario you suggest is not likely to happen - on a lease deal, the car is registered to the leasing company rather than the lessee /individual. The company will have to sign lease paperwork, and will receive VAT invoices every month for the lease of the vehicle, and the leasing company will absolutely insist that the direct debit that the monthly payments are taken from has the same account name as the lessee of the vehicle.
skahigh said:
I think you may have misunderstood the suggested scenario.
There is no subleasing going on, the business details are simply used as a vehicle to qualify for a business only lease deal. The car would be registered to the individual (I presume) and payments made from the individual's account. As far as the ltd company is concerned the car doesn't exist.
Herein lies the problem, the application is made in the business name therefore the business would be the registered keeper. I cannot see how you could get around this, anything else is misrepresentation.There is no subleasing going on, the business details are simply used as a vehicle to qualify for a business only lease deal. The car would be registered to the individual (I presume) and payments made from the individual's account. As far as the ltd company is concerned the car doesn't exist.
It's similar to telling an insurance company that a 60 year old woman is driving the car when in reality it's an 18 year old lad.
Zoon said:
skahigh said:
I think you may have misunderstood the suggested scenario.
There is no subleasing going on, the business details are simply used as a vehicle to qualify for a business only lease deal. The car would be registered to the individual (I presume) and payments made from the individual's account. As far as the ltd company is concerned the car doesn't exist.
Herein lies the problem, the application is made in the business name therefore the business would be the registered keeper. I cannot see how you could get around this, anything else is misrepresentation.There is no subleasing going on, the business details are simply used as a vehicle to qualify for a business only lease deal. The car would be registered to the individual (I presume) and payments made from the individual's account. As far as the ltd company is concerned the car doesn't exist.
It's similar to telling an insurance company that a 60 year old woman is driving the car when in reality it's an 18 year old lad.
V5 stays in the car companies name for most leases.
I have two leased cars. Both are business leases applied for in the name of my dental practice, which is not an Ltd.
The M5's V5 I have never seen. BMW (Alphabet Financial) keep it with them and it is, I presume, in their name. Hence any speeding fines get sent to them then they pass it to me.
Our C250 was also a business lease through Mercedes Corporate. This is an operating lease which means the V5 is in my wifes name, even though the application was made in the name of our company.
The money for both is paid from our business account - They were both pretty insistent on this point - this proves to them that you have a business I guess.
The other difference is that BMW pay road tax every year whereas Merc only pay the first year.
-Z- said:
Not quite right.
V5 stays in the car companies name for most leases.
I have two leased cars. Both are business leases applied for in the name of my dental practice, which is not an Ltd.
The M5's V5 I have never seen. BMW (Alphabet Financial) keep it with them and it is, I presume, in their name. Hence any speeding fines get sent to them then they pass it to me.
Our C250 was also a business lease through Mercedes Corporate. This is an operating lease which means the V5 is in my wifes name, even though the application was made in the name of our company.
The money for both is paid from our business account - They were both pretty insistent on this point - this proves to them that you have a business I guess.
The other difference is that BMW pay road tax every year whereas Merc only pay the first year.
Sorry I meant the business would be the registered keeper in the eyes of the leasing company, not with the DVLA. So all correspondence regarding the vehicle would be addressed to the company and not the individual driving.V5 stays in the car companies name for most leases.
I have two leased cars. Both are business leases applied for in the name of my dental practice, which is not an Ltd.
The M5's V5 I have never seen. BMW (Alphabet Financial) keep it with them and it is, I presume, in their name. Hence any speeding fines get sent to them then they pass it to me.
Our C250 was also a business lease through Mercedes Corporate. This is an operating lease which means the V5 is in my wifes name, even though the application was made in the name of our company.
The money for both is paid from our business account - They were both pretty insistent on this point - this proves to them that you have a business I guess.
The other difference is that BMW pay road tax every year whereas Merc only pay the first year.
Looking at this from the point if view of someone looking at getting a business lease through the company and reimbursing the full lease cost (so hoping not to have any problems with hmrc) I am an accountant but not tax specialist - but go on tax courses where there has been some comment on this issue and one of my business partners spends part of his time dealing with tax investigations and he agreed with what the lecturer had said:
The position seems to be getting clearer with a couple of recent tax cases and a change in the finance act - meaning that although one company won recently (ie, it took on leases and sublet to employees and the tribunal/court rejected hmrc case that should be assessable benefit in kind on company cars), a forthcoming change in the finance act means you won't be able to win. NB if you reclaim the VAT then you will definitely lose somewhere
Not only that, but the consequences of losing are fairly scary for the employee who will get stiffed with the benefit in kind on the vehicle and also probably not get the deduction for the contribution to the cost of the lease (I thought it was ridiculous too but to get the deduction you need to have it in writing that it's a requirement to repay it - that would be ok for regular employees who would prob have such a thing in place but director shareholders prob wouldn't bother)
Now there may be many people doing this and getting away with it - but the finance act change suggests hmrc will be going looking for this. And if you get caught there will be lots of tax and interest and penalties to pay.
All a bit sledgehammer to crack a walnut if you ask me but there it is
I keep wondering whether I should stick a car through my business but have never found a way of doing it that made sense financially (without getting something v dull)
The position seems to be getting clearer with a couple of recent tax cases and a change in the finance act - meaning that although one company won recently (ie, it took on leases and sublet to employees and the tribunal/court rejected hmrc case that should be assessable benefit in kind on company cars), a forthcoming change in the finance act means you won't be able to win. NB if you reclaim the VAT then you will definitely lose somewhere
Not only that, but the consequences of losing are fairly scary for the employee who will get stiffed with the benefit in kind on the vehicle and also probably not get the deduction for the contribution to the cost of the lease (I thought it was ridiculous too but to get the deduction you need to have it in writing that it's a requirement to repay it - that would be ok for regular employees who would prob have such a thing in place but director shareholders prob wouldn't bother)
Now there may be many people doing this and getting away with it - but the finance act change suggests hmrc will be going looking for this. And if you get caught there will be lots of tax and interest and penalties to pay.
All a bit sledgehammer to crack a walnut if you ask me but there it is
I keep wondering whether I should stick a car through my business but have never found a way of doing it that made sense financially (without getting something v dull)
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