Car Dealership VAT Query
Discussion
Right, I am interested in knowing whether or not I could set up a car dealership (easily enought), buy say a £117,500 car, claim the £17,500 back, sell the said car for say £110,000 & if I registered to the flat rate VAT scheme, vehicle retailers (7%), pay VAT back on the sale at £7,700 (7% of £110,000).
This would equate in a profit of £2,300.
I understand understand under the flat rate scheme there are turnover thresholds (circa 200k) & that VAT in full can be claimed back on 'major' items over £2000 (I seem to remember).
Is this all correct ? Can car dealers claim VAT back on cars, if they bought direct from a dealer (not from joe public) ?
Anyone ?
This would equate in a profit of £2,300.
I understand understand under the flat rate scheme there are turnover thresholds (circa 200k) & that VAT in full can be claimed back on 'major' items over £2000 (I seem to remember).
Is this all correct ? Can car dealers claim VAT back on cars, if they bought direct from a dealer (not from joe public) ?
Anyone ?
Most car dealers operate on a margin scheme when selling secondhand cars i.e the VAT they charge to their customer is based on the difference between what they buy the car for and what they sell it for. They do not claim back the Input VAT on the purchase price of the car. The customer cannot claim back this type of VAT either.
On rare occasions, if they do claim back the Input VAT on the car when purchased, they MUST charge VAT on the full sale value of the car when it is sold on. The customer CAN claim back this "normal" type VAT in certain restricted circumstances.
>> Edited by Eric Mc on Tuesday 16th May 11:05
On rare occasions, if they do claim back the Input VAT on the car when purchased, they MUST charge VAT on the full sale value of the car when it is sold on. The customer CAN claim back this "normal" type VAT in certain restricted circumstances.
>> Edited by Eric Mc on Tuesday 16th May 11:05
Fair enough. However, I would imagine that selling goods under a second hand margin scheme - which is the norm for second hand car retailers - must preclude the use of the flat rate scheme.
Don't forget that using the FRS means you have to produce a Standard Rate Invoice with all your sales. In other words, your customers receive a normal invoice showing normal 17.5% VAT - which they can claim back if they are VAT registered. It doesn't matter that you as a trader are actually only paying 7% VAT (or whatever the FRS suggests) to the VAT man.
I would check with the VAT office to find out what they say about the interaction between FRS and Margin Schemes.
Don't forget that using the FRS means you have to produce a Standard Rate Invoice with all your sales. In other words, your customers receive a normal invoice showing normal 17.5% VAT - which they can claim back if they are VAT registered. It doesn't matter that you as a trader are actually only paying 7% VAT (or whatever the FRS suggests) to the VAT man.
I would check with the VAT office to find out what they say about the interaction between FRS and Margin Schemes.
Eric Mc said:
I can't login on that thread for some reason.
Hobo - I think your plans are far to close to the wind and any VAT man worth his salt would work out what was going on from a mile away.
Have you asked your own accountant about the feasability of such a "scheme".
surely if you set it up as a hire company (with you as driver) there would be no problem in chopping and changing to keep up with the market and remain competitive?
..(see, told you i was watching)
As I said on the other thread. As far as I am aware you can not reclaim the 17.5% tax you pay and then when you sell it decide to trade on the margin scheme at 7%. If you claim 17.5% you pay 17.5% of your sale price back.
VAT surrounding cars is quite complicated so I suggest that you speak to an accountant before commiting to anything!
VAT surrounding cars is quite complicated so I suggest that you speak to an accountant before commiting to anything!
m raks said:
Whomever wants to hire it, surely ? If that be one of my other companies then so be it.
and in this occasion, it would be a paper transfer of monies due. nothing more.
But if you hired it to yourself and your business is a limited company are you not going to incure benefits in kind tax as it is for your own personal use?
I may have that completely wrong though!
If you are dealing with another company that you also own, you will be under a legal obligation to reveal the volume and nature of these transactions in BOTH companies' annual accounts.
You must also be aware that the Revenue are very likely to block or deny any tax claims (including VAT) brought about by a transaction or series of transactions which do not seem to have any other purpose behind them other than to facilitate a tax claim.
As has just been mentioned above, you MUST be fully aware of the Benefit in Kind implications of having use of a company owned car - irrespective as to which company supplies the car to you (or anybody else who is an officer or employee of either company)
>> Edited by Eric Mc on Tuesday 16th May 13:31
You must also be aware that the Revenue are very likely to block or deny any tax claims (including VAT) brought about by a transaction or series of transactions which do not seem to have any other purpose behind them other than to facilitate a tax claim.
As has just been mentioned above, you MUST be fully aware of the Benefit in Kind implications of having use of a company owned car - irrespective as to which company supplies the car to you (or anybody else who is an officer or employee of either company)
>> Edited by Eric Mc on Tuesday 16th May 13:31
amcphillips said:
Whomever wants to hire it, surely ? If that be one of my other companies then so be it.
and in this occasion, it would be a paper transfer of monies due. nothing more.
But if you hired it to yourself and your business is a limited company are you not going to incure benefits in kind tax as it is for your own personal use?
I may have that completely wrong though!
only i would have thought if you declare it as being personal usage?
surely commuting to and from work is ok?
I have mentioned it to my accountant & am awaiting a result.
I am intruiged about this purchase & sale VAT, as there is blatently a section in the 'flat rate' scheme which covers 'Vehicle Retailing'. So if this is the case then they are saying that YOU CAN purchase, claim the full 17.5% back & then pay the 7% VAT on the sale value.
We shall see.
I am intruiged about this purchase & sale VAT, as there is blatently a section in the 'flat rate' scheme which covers 'Vehicle Retailing'. So if this is the case then they are saying that YOU CAN purchase, claim the full 17.5% back & then pay the 7% VAT on the sale value.
We shall see.
Eric Mc said:
m raks, loathe though I am to say it, you do seem to be displaying a profound lack of knowledge as to how Benefits in Kind work.
Talk to your accountant. If he knows his stuff, he'll put you straight.
you're probably totally correct, as he only seems to advise me when i approach him on something!
the business i've setup has no real need to offer me any BiK, as there are no real perks to be had. so therefore i've never really done any homework. could you offer a place i could do some reading perhaps - laymen's explanations would be useful!
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