VAT registration for small business

[GTIR]

I am a sole trader and and thinking this is the way to go.
80% of my customers are vat registered companys with the rest being Jo public. Most of my expenses are car related, fuel, lease payments, servicing etc
I also use subbys who are 95% vat registered.

I plan to buy (pcp) a new 40k car in march over three years and am thinking that I would like to get the vat back, which should "cover" the initial 4k deposit.

Is it as simple as this and what are the downsides of being vat registered, apart from qtrly books?

(I know, search is rubbish and I'm on my iPhone so can't be arsed)

[escargot]

A pcp is a personal contract purchase so i'm not sure where you stand on claiming vat back. I didn't actually think you could?

[Smiler.]

VAT returns are a pain in the arse.

Other than that, pretty simple.

[escargot]

How so? There are only about 10 boxes you need answers for (and 5 of those are usually zeros unless you buy/sell in Europe).

If you've got even a half decent spreadsheet or accounting package VAT returns are a piece of cake.

[UpTheIron]

GTIR said:

I plan to buy (pcp) a new 40k car in march over three years and am thinking that I would like to get the vat back, which should "cover" the initial 4k deposit.

Forgetting the personal bit of PCP, and IANAA but if the car is available for personal use (including commuting) then you cannot reclaim all the VAT.

http://www.hmrc.gov.uk/VAT/managing/reclaiming/mot...

[Smiler.]

escargot said:

How so? There are only about 10 boxes you need answers for (and 5 of those are usually zeros unless you buy/sell in Europe).

If you've got even a half decent spreadsheet or accounting package VAT returns are a piece of cake.

Yep, I meant the calculations to complete the return.

Entering the data is a pain unless you only have 5 lines per month.

[Eric Mc]

Reclaiming VAT on cars is virtually impossible, unless your business is car related or you can satisfy EXTREMELY strict criteria regarding busuiness useage. 99% of the Time Input VAT on cars cannot be reclaimed.

However, if you purchase a "Commercial Vwehicle", you CAN get the vat BACK.

VAT returns need not be that difficult - provided you are disciplined with retianing your paperwork and keep reasonable records.

There are a number of "simplification" schemes available - such as the "Flat Rate Scheme" and "Cash Accounting for VAT".

[singlecoil]

Eric Mc said:

R
However, if you purchase a "Commercial Vwehicle", you CAN get the vat BACK.

Indeed, which is why you see so many 4 door 4WD pickups collecting kids from school.

[GTIR]

UpTheIron said:

GTIR said:

I plan to buy (pcp) a new 40k car in march over three years and am thinking that I would like to get the vat back, which should "cover" the initial 4k deposit.

Forgetting the personal bit of PCP, and IANAA but if the car is available for personal use (including commuting) then you cannot reclaim all the VAT.

http://www.hmrc.gov.uk/VAT/managing/reclaiming/mot...

Even if it's a pcp it's still a purchase for my company, pcp is a bit misleading in that sense as it's just like a hp or lease - deposit, fixed monthly payments over a fixed period with an optional baloon payment.

My business is private hire, like a taxi but posher! So accoriding to that website I'm quids in!

[escargot]

GTIR said:

UpTheIron said:

GTIR said:

I plan to buy (pcp) a new 40k car in march over three years and am thinking that I would like to get the vat back, which should "cover" the initial 4k deposit.

Forgetting the personal bit of PCP, and IANAA but if the car is available for personal use (including commuting) then you cannot reclaim all the VAT.

http://www.hmrc.gov.uk/VAT/managing/reclaiming/mot...

Even if it's a pcp it's still a purchase for my company, pcp is a bit misleading in that sense as it's just like a hp or lease - deposit, fixed monthly payments over a fixed period with an optional baloon payment.

My business is private hire, like a taxi but posher! So accoriding to that website I'm quids in!

Yes, I was going to qualify my post with 'business contract purchase' does exist but it becomes a non-regulated agreement and therefore you can get slapped on settlement figures along with no halves & thirds rule.

You should also check the terms of the agreement as it's not uncommon to have clauses that preclude using the vehicle for private hire etc.

[GTIR]

Just chatted to my accountant. Will need to buy it so a HP will be in order. PCP you only get tax relief on the monthly payments. Mercedes actually own the car and their the ones who are getting the tax benefits.

Private hire comes under the same as taxi, it's just a generic term used by the tax man. After all we do the same service just long distance. He is an expert within this industry so I hope he knows what he's talking about.

[escargot]

PCP is HP but with a balloon (guaranteed), it's on balance sheet and classed as an asset to the business (if Ltd) so I'd get a second opinion on that advice. Are you sure he's not confusing it with personal contract hire?

[escargot]

GTIR said:

Mercedes actually own the car and their the ones who are getting the tax benefits.

This is wrong mate. You 'own' the vehicle on a PCP/BCP - you'll get the V5. They retain 'title' to the vehicle and can repossess if you default.

Naturally though - this is PH and you don't know me etc but i'd seriously suggest you get a second opinion.

[GTIR]

This us all good info for me to chew over thanks.

[Eric Mc]

From a tax point of view, you need to be fully aware of the nature of the finance agreement you are entering into.

The nature of the HP or lease deal will determine how the asset is treated for Capital Allowances purposes.

Essentially it works like this -

Buy Outright
Buy using bank loan
Acquire with HP

HMRC treat the asset as yours from day 1 and you can claim the Capital Allowances on the asset.

Finance Lease - treated as owned by tghe leasing company. They claim the Capital Allowances - not you.
You claim the "finance cost" element of your repayments (not the full repayments) and normal annual depreciation on teh asset

Oparting lease - treated as owned by the leasing company so they claim the Capital Allowances. You claim the monthly repayments in full.