Taking share dividend as good rather than cash VAT.
Discussion
Hypothetical situation:
A VAT registered company makes a profit. Company pays it's corporation tax on said profits. The director who owns 100% of the shares decides to pay a share divided of £2K from the retained profit and credits his loan account accordingly.
Director wants a new telly, sees one he likes for £1,200 so decides to draw on his loan account. The company buys the TV and claims the VAT on its purchase.
Does the director reduce his loan account by £1,200 (leaving £800 still to draw) which is the full purchase price of the TV or can he reduce it by £1,000 (leaving £1k still to draw) which is the price of the TV which the company has incurred due to claiming it back?
A VAT registered company makes a profit. Company pays it's corporation tax on said profits. The director who owns 100% of the shares decides to pay a share divided of £2K from the retained profit and credits his loan account accordingly.
Director wants a new telly, sees one he likes for £1,200 so decides to draw on his loan account. The company buys the TV and claims the VAT on its purchase.
Does the director reduce his loan account by £1,200 (leaving £800 still to draw) which is the full purchase price of the TV or can he reduce it by £1,000 (leaving £1k still to draw) which is the price of the TV which the company has incurred due to claiming it back?
AJL308 said:
Hypothetical situation:
A VAT registered company makes a profit. Company pays it's corporation tax on said profits. The director who owns 100% of the shares decides to pay a share divided of £2K from the retained profit and credits his loan account accordingly.
Director wants a new telly, sees one he likes for £1,200 so decides to draw on his loan account. The company buys the TV and claims the VAT on its purchase.
Does the director reduce his loan account by £1,200 (leaving £800 still to draw) which is the full purchase price of the TV or can he reduce it by £1,000 (leaving £1k still to draw) which is the price of the TV which the company has incurred due to claiming it back?
You don't claim the VAT. You just charge the whole cost to the DLA.A VAT registered company makes a profit. Company pays it's corporation tax on said profits. The director who owns 100% of the shares decides to pay a share divided of £2K from the retained profit and credits his loan account accordingly.
Director wants a new telly, sees one he likes for £1,200 so decides to draw on his loan account. The company buys the TV and claims the VAT on its purchase.
Does the director reduce his loan account by £1,200 (leaving £800 still to draw) which is the full purchase price of the TV or can he reduce it by £1,000 (leaving £1k still to draw) which is the price of the TV which the company has incurred due to claiming it back?
Let's face it. Everybody including HMRC knows some items purchased by a business will end up in directors/employees possession. The effort in investigating it is just not worthwhile.
Strangely my accountant visited my office the other week for a joint client meeting. He had never visited before. He commented that he was pleased to actually see all the art on the walls and huge fish take I have purchased via the business.
Good job he didn't look for the 65" tv.
Strangely my accountant visited my office the other week for a joint client meeting. He had never visited before. He commented that he was pleased to actually see all the art on the walls and huge fish take I have purchased via the business.
Good job he didn't look for the 65" tv.
jonamv8 said:
What happens if tv is meant for boardroom, vat reclaimed and during install its dropped broken rendering it useless?
Company writes it off ?
Director takes it home fixes it and watches strictly ?
If it is genuinely broken and scrapped/thrown out - there are no VAT issues.Company writes it off ?
Director takes it home fixes it and watches strictly ?
If it is taken for personal use - the VAT needs to be repaid - end of story.
I’d like to add that it’s very easy to listen to the talk “down the pub” about how, in the event of HMRC coming for a look round, these big shots are “just going to say this, just going to say that” - but the reality based on my experience of three VAT inspections is that the HMRC staff are far from stupid and lots of these people come unstuck when put under pressure during an audit.
My interactions with the inspectors have all been positive experiences. Even the one where I wrote some software wrong that captured VAT incorrectly for 18 months which meant they owed me £60k back!
Would you want to risk spoiling the relationship between you and the tax inspector for the sake of a few pounds saved on some small office trinkets or whatever? I certainly wouldn’t - it’s normally pretty clear when you have made an error vs a deliberate attempt to steal the money that belongs to HMRC, and, again, I have always been offered excellent leniency for genuine errors with fully suspended/cancelled penalties for those inaccuracies that turn up. I feel sure that if we were not presenting a clean set of books that wouldn’t be the case.
Also, honestly, there is no benefit to confusing the issue by putting the TV through and the director gets better consumer rights by buying as an individual anyway. I’d say you’re overcomplicating stuff.
My interactions with the inspectors have all been positive experiences. Even the one where I wrote some software wrong that captured VAT incorrectly for 18 months which meant they owed me £60k back!
Would you want to risk spoiling the relationship between you and the tax inspector for the sake of a few pounds saved on some small office trinkets or whatever? I certainly wouldn’t - it’s normally pretty clear when you have made an error vs a deliberate attempt to steal the money that belongs to HMRC, and, again, I have always been offered excellent leniency for genuine errors with fully suspended/cancelled penalties for those inaccuracies that turn up. I feel sure that if we were not presenting a clean set of books that wouldn’t be the case.
Also, honestly, there is no benefit to confusing the issue by putting the TV through and the director gets better consumer rights by buying as an individual anyway. I’d say you’re overcomplicating stuff.
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