Speculating - Have I got this right ?
Discussion
So... you intend buying say a £100k car through a business.
The car is actually £ 85,106.40 + VAT (£14,893.60).
You claim the VAT back through the business, right ? Therefore meaning you only pay the £ 85,106.40 for the car.
Now, you keep the car a couple of months & out a few miles on it (your personal transport) although not a registered owner as that would be the company, right ? (not sure on this).
Then, you come to sell the car, including the VAT & have to pay this element back.
However, what if you were to use the 'Flat Rate' tax scheme ? This would work as follows:
Buy car: £100,000
Claim back VAT element: £14,893.60
ACTUAL COST OF CAR TO YOURSELF: £85,106.40
Hopefullt sell car within a couple of months later for £100,000.00 (including VAT) (OR MORE!!!)
PAY VAT BACK @ FLAT RATE SCHEME FOR RETAILING VEHICLES, IE 7% (6% 1st year) on £100,000: £7,000 (£6,000.00 1st year)
So cost you £85,106.40 originally.
Sell for £100,000 less tax owed, ie £7000 = £93,000.00.
A PROFIT OF £7,000 FOR DOING F@CK ALL & HAVING A BRILLIANT TOY FOR A WHILE !!!
Is this right or have I missed something ?
The car is actually £ 85,106.40 + VAT (£14,893.60).
You claim the VAT back through the business, right ? Therefore meaning you only pay the £ 85,106.40 for the car.
Now, you keep the car a couple of months & out a few miles on it (your personal transport) although not a registered owner as that would be the company, right ? (not sure on this).
Then, you come to sell the car, including the VAT & have to pay this element back.
However, what if you were to use the 'Flat Rate' tax scheme ? This would work as follows:
Buy car: £100,000
Claim back VAT element: £14,893.60
ACTUAL COST OF CAR TO YOURSELF: £85,106.40
Hopefullt sell car within a couple of months later for £100,000.00 (including VAT) (OR MORE!!!)
PAY VAT BACK @ FLAT RATE SCHEME FOR RETAILING VEHICLES, IE 7% (6% 1st year) on £100,000: £7,000 (£6,000.00 1st year)
So cost you £85,106.40 originally.
Sell for £100,000 less tax owed, ie £7000 = £93,000.00.
A PROFIT OF £7,000 FOR DOING F@CK ALL & HAVING A BRILLIANT TOY FOR A WHILE !!!
Is this right or have I missed something ?
Right then ...............
I decide to go buy a Ferrari F430 Spider
Price is £110,295.32 + £19,301.68(VAT) = a total price of £129,800
I claim the £19,301.68 back.
I keep the car a couple of months & put 1500 miles on it. Then I decide to sell.
Now I only intend doing this a couple of times a year (during summer to have nice cars), so turnover should be kept below flat rate threshold, therefore allowing me to benefit from the 7% scheme.
The following are the returns at various sell costs:
Sell for £129,800.
VAT due back would be £9,086(7% of sell price).
I have also paid £110,295.32 for the car
Therefore profit of £10,418.68
Sell for a 10k premium
profit of £19,178.68
Sell for £120,000
profit of £1,304.68
Surely you could run a brand spanking new F430 for 3 months, put 2500 miles on it & sell at £10k under list quite easily. Could you not ?
Imagine the fun you'd have during summer & also make 1k (at least).
I decide to go buy a Ferrari F430 Spider
Price is £110,295.32 + £19,301.68(VAT) = a total price of £129,800
I claim the £19,301.68 back.
I keep the car a couple of months & put 1500 miles on it. Then I decide to sell.
Now I only intend doing this a couple of times a year (during summer to have nice cars), so turnover should be kept below flat rate threshold, therefore allowing me to benefit from the 7% scheme.
The following are the returns at various sell costs:
Sell for £129,800.
VAT due back would be £9,086(7% of sell price).
I have also paid £110,295.32 for the car
Therefore profit of £10,418.68
Sell for a 10k premium
profit of £19,178.68
Sell for £120,000
profit of £1,304.68
Surely you could run a brand spanking new F430 for 3 months, put 2500 miles on it & sell at £10k under list quite easily. Could you not ?
Imagine the fun you'd have during summer & also make 1k (at least).
Erm .... aren't you all missing the basic fact?
You say 'I buy', but in actual fact the company makes the purchase.
When it comes to sell the vehicle, it's not sold as a private vehicle (VAT exempt), but rather as a company asset and VAT is paid at the full rate.
That's all right off the top of my head and I'll happily be corrected by any accountants we have on here.
(If it is correct, I've heard of stranger discrepancies). Hmmmm .... most accountants I know drive MPVs and would much rather read actuary tables than car websites ... do we actually have any on here?
You say 'I buy', but in actual fact the company makes the purchase.
When it comes to sell the vehicle, it's not sold as a private vehicle (VAT exempt), but rather as a company asset and VAT is paid at the full rate.
That's all right off the top of my head and I'll happily be corrected by any accountants we have on here.
(If it is correct, I've heard of stranger discrepancies). Hmmmm .... most accountants I know drive MPVs and would much rather read actuary tables than car websites ... do we actually have any on here?
Yes, I meant the company bought it.
With regards to selling it. The flat rate scheme is for simplified accounts. It allows you to only claim VAT on major purchases (at full 17.5%), items over £2500 I think, however you only pay VAT back at the lower rate.
There are turnover stimpulations, however I think this is circa 200k per annum.
With regards to selling it. The flat rate scheme is for simplified accounts. It allows you to only claim VAT on major purchases (at full 17.5%), items over £2500 I think, however you only pay VAT back at the lower rate.
There are turnover stimpulations, however I think this is circa 200k per annum.
The other great point would be that you wouldn't actually hardly be financing anything yourself.
You put down a 25% deposit, your bank lends the company the other 75% (against an asset, which is the car itself).
If you timed it right, ie bought just before you had a VAT return, you'd actually get the VAT back within a few weeks. So you'd actually only have say £30k to cover for a month or so.
You put down a 25% deposit, your bank lends the company the other 75% (against an asset, which is the car itself).
If you timed it right, ie bought just before you had a VAT return, you'd actually get the VAT back within a few weeks. So you'd actually only have say £30k to cover for a month or so.
I may be wrong, but as long as we are talking about the same scheme I thought that if you reclaimed the VAT element back (17.5%) when you purchased the vehicle, you have to pay the VAT back ON the sale price ie: if you sell the vehicle for £100,000.00 you need to part with £17,500.00 to the dreaded man.
They call these "Qualifying" vehicles. You would also need to be very careful as vehicle need to be used 100% for business (it is only really leasing/rental companies that can utilise this scheme). If you use the vehicle to go to the shops for ciggies and a paper then the game is over.
I cannot imagine he (bastard) will let you claim back 17.5% and then pay 7%. It's just not in his nature!!
They call these "Qualifying" vehicles. You would also need to be very careful as vehicle need to be used 100% for business (it is only really leasing/rental companies that can utilise this scheme). If you use the vehicle to go to the shops for ciggies and a paper then the game is over.
I cannot imagine he (bastard) will let you claim back 17.5% and then pay 7%. It's just not in his nature!!
You can only claim 100% of the VAT back on cars in certain situations (eg. use for driving tuition or purchased solely for self drive hire). Check the HMRC website. If you are using it for personal use I do not think that you can (and if you could I'm sure a lot more people would be doing it!)
Just found this from the HMRC website:
VAT incurred on the purchase of motor cars that are made available for private use is not deductible input tax unless the motor car is predominantly for use as a taxi, self-drive hire car, or for driving tuition. A `motor car' is defined by Article 2 of the VAT (Cars) Order 1992 No.3122.You should ensure that the VAT on such cars is not charged to revenue. For capital allowances purposes the cost of the car should include the VAT.
When the car is disposed of by a registered trader, VAT is payable in full if input tax has been reclaimed. Where there has been no input tax deduction VAT is payable on the difference, if any, between the purchase price and the selling price. Where exceptionally this happens, the sale price exclusive of VAT is the amount to be taken into account for capital allowance purposes.
Basically you can;t choose to reclaim 17.5% and then decide to trade on the margin scheme. It's one or the other!
So no you can't
VAT incurred on the purchase of motor cars that are made available for private use is not deductible input tax unless the motor car is predominantly for use as a taxi, self-drive hire car, or for driving tuition. A `motor car' is defined by Article 2 of the VAT (Cars) Order 1992 No.3122.You should ensure that the VAT on such cars is not charged to revenue. For capital allowances purposes the cost of the car should include the VAT.
When the car is disposed of by a registered trader, VAT is payable in full if input tax has been reclaimed. Where there has been no input tax deduction VAT is payable on the difference, if any, between the purchase price and the selling price. Where exceptionally this happens, the sale price exclusive of VAT is the amount to be taken into account for capital allowance purposes.
Basically you can;t choose to reclaim 17.5% and then decide to trade on the margin scheme. It's one or the other!
So no you can't
The other downside to your plan is that if you want an F430 now you would have to pay a premium and probably buy from a private individual which would mean there would not be any VAT for you to claim.
You can set up as car hire/leasing firm but I think the Revenue and the VAT man would soon suss it out if you weren't actually running it as a business and it was just a cover! Oh and then you have extra costs such as insurances, accountants, legal fees and tax on your profit.
>> Edited by amcphillips on Tuesday 16th May 12:13
You can set up as car hire/leasing firm but I think the Revenue and the VAT man would soon suss it out if you weren't actually running it as a business and it was just a cover! Oh and then you have extra costs such as insurances, accountants, legal fees and tax on your profit.
>> Edited by amcphillips on Tuesday 16th May 12:13
[quote=amcphillips]...
You can set up as car hire/leasing firm but I think the Revenue and the VAT man would soon suss it out if you weren't actually running it as a business and it was just a cover! Oh and then you have extra costs such as insurances, accountants, legal fees and tax on your profit.
quote]
... not unless you already have another business running, and this is a side element (assuming there are no other benfits to opening up another co to run this seperately)
also, note the car wouldn't have to be a 430 spider! it could be something that is available with immediate delivery and would still demand a high price due to build times.
plenty out there - c2s, am8, db9, gt etc.?
ps. i'm watching this thread with great interest!
You can set up as car hire/leasing firm but I think the Revenue and the VAT man would soon suss it out if you weren't actually running it as a business and it was just a cover! Oh and then you have extra costs such as insurances, accountants, legal fees and tax on your profit.
quote]
... not unless you already have another business running, and this is a side element (assuming there are no other benfits to opening up another co to run this seperately)
also, note the car wouldn't have to be a 430 spider! it could be something that is available with immediate delivery and would still demand a high price due to build times.
plenty out there - c2s, am8, db9, gt etc.?
ps. i'm watching this thread with great interest!
Exactly. I already have a couple of other businesses, and therefore could surely just either:
a) set it up under one of the other businesses
or
b) set up a new company & then lease the car to the other business/s
Accounting costs would be minimal (few hundred at most) & tax on profit (well you have to pay it sometime - assuming there is any).
As to running costs, inurance, etc, well I have to pay these on my cars now, so no difference.
Only difference I can see is that I get VAT back (or most of it).
Since it would be running as a lease/hire company, then you could also rent it to others as & when (weddings, etc).
Hmmm, F430 Challenge Stradale. Wonder what waiting lists are like
a) set it up under one of the other businesses
or
b) set up a new company & then lease the car to the other business/s
Accounting costs would be minimal (few hundred at most) & tax on profit (well you have to pay it sometime - assuming there is any).
As to running costs, inurance, etc, well I have to pay these on my cars now, so no difference.
Only difference I can see is that I get VAT back (or most of it).
Since it would be running as a lease/hire company, then you could also rent it to others as & when (weddings, etc).
Hmmm, F430 Challenge Stradale. Wonder what waiting lists are like
Gassing Station | Supercar General | Top of Page | What's New | My Stuff