Speculating - Have I got this right ?
Discussion
m raks said:
You have realised that you can't reclaim 17.5% when you buy it and then only pay 7% back when you sell it haven't you?
did he not quote that on larger purchases you can make the reclaim?
From HMRC again on the flat rate scheme:
If capital assets are purchased with a VAT inclusive value of £2,000 or more, the VAT can be recovered in the normal way. This concession, however, cannot be used where the assets were:
acquired for resale, or for incorporation in goods to be sold
acquired to be hired out, leased or let
for consumption within one year, or
covered by the capital goods scheme.
Setting up as car lease or car hire would therefore mean you couldn't reclaim the input VAT.
That would mean that you would have to be giving driving instruction in say an F430? For the Revenue to even believe that you would have to be DIA registered to charge for lessons and it would have to have the majority of its use being driving instruction.
This is all my interpretation of the VAT rules by the way, I am no professional!
This is all my interpretation of the VAT rules by the way, I am no professional!
I've never bought a Ferrari before so couldn't swear by it but surely the once the car is driven off the forecourt the vehicle is subject to significant depreciation - especially a Ferrari. With that in mind you may not make any profit but depending on depreciation rate may break even ?
If you go by the £1304 profit option you'd have to sell the used/second hand Ferrari for £120K, the question is would Ferrari owners buy a New Ferrari (with their own choice of extras) for £129K OR a used F430 with a few thousand miles for £10K less?
If you go by the £1304 profit option you'd have to sell the used/second hand Ferrari for £120K, the question is would Ferrari owners buy a New Ferrari (with their own choice of extras) for £129K OR a used F430 with a few thousand miles for £10K less?
d33p said:
I've never bought a Ferrari before so couldn't swear by it but surely the once the car is driven off the forecourt the vehicle is subject to significant depreciation - especially a Ferrari. With that in mind you may not make any profit but depending on depreciation rate may break even ?
If you go by the £1304 profit option you'd have to sell the used/second hand Ferrari for £120K, the question is would Ferrari owners buy a New Ferrari (with their own choice of extras) for £129K OR a used F430 with a few thousand miles for £10K less?
Not when there's a waiting list of up to 2 years. People will pay a premium to get it now, take a look through top marques etc.
amcphillips said:
You have realised that you can't reclaim 17.5% when you buy it and then only pay 7% back when you sell it haven't you?
I hope he has! The rules of the VAT flat rate scheme for cars or any other purchase is that if you come to sell the asset which you have claimed VAT back at 17.5% on the sale, when you come to sell it you must also give 17.5% of your sale price to Gordon Brown.
There are a couple of exemptions for eligability to the flat rate scheme itself, the first is the asset which must be worth more than £2000. This would be fine for an F430. The other problem is to be eligable for the flat rate scheme the business must have a taxable turnover of less than £150k or thereabouts. Thus when you submit a VAT return telling then you have a turnover of £35,000 this quarter and are handing over £3000 in VAT, whilst also spending £120,000 on a Ferrari and thus claiming £20,000 in VAT you can bet your bottom dollar that you will be investigated with a fine tooth comb before you (dont) receive a cheque for £17,000 of Customs and Excises money!
The most pertinent question is that it is practically impossible for a company to turnover less than £150k a year and yet have £120k of profit or which all is used for such a useful asset!
>> Edited by justinp1 on Wednesday 17th May 01:08
The scheme clearly has a section for vehicle retailing @ 7%, so why would they put it there ?
As for turnover, I think its actually £225k for flat rate scheme.
As for profit on business. What is that concern to them ? As long as you stick within the operating boundaries they laid out then you're fine. Its not as if there hasn't been loopholes in the system before (dividends anyone ?).
I'll wait to see what the accountant says.
As for turnover, I think its actually £225k for flat rate scheme.
As for profit on business. What is that concern to them ? As long as you stick within the operating boundaries they laid out then you're fine. Its not as if there hasn't been loopholes in the system before (dividends anyone ?).
I'll wait to see what the accountant says.
amcphillips said:
That would mean that you would have to be giving driving instruction in say an F430? For the Revenue to even believe that you would have to be DIA registered to charge for lessons and it would have to have the majority of its use being driving instruction.
This is all my interpretation of the VAT rules by the way, I am no professional!
I'd like to see an insurance quote for this
the VAT element in cars is a very complicated issue and seems to be shrouded in confusion. As a VAT registered car dealer (irrespective of turn over or profit) you can reclaim the vat on the purchase of the following vehicles (but they have to be invoiced and paid for by the same company) -
New cars
Demo or Pre reg cars that are VAT qualifying
Ex C/Hire or Lease cars where the lease company has reclaimed the VAT.
When the vehicle is invoiced out you have to show 17.5% vat on your invoice. This then means you have no VAT to pay on your profit -
Example -
Purchase price £100000 (£85106.38 + £14893.62VAT)
Sale Price £110000 (£93617.02 + £16382.98VAT)
Profit £93617.02 - £85106.38 = £8510.64
New cars
Demo or Pre reg cars that are VAT qualifying
Ex C/Hire or Lease cars where the lease company has reclaimed the VAT.
When the vehicle is invoiced out you have to show 17.5% vat on your invoice. This then means you have no VAT to pay on your profit -
Example -
Purchase price £100000 (£85106.38 + £14893.62VAT)
Sale Price £110000 (£93617.02 + £16382.98VAT)
Profit £93617.02 - £85106.38 = £8510.64
hobo said:
The scheme clearly has a section for vehicle retailing @ 7%, so why would they put it there ?
As for turnover, I think its actually £225k for flat rate scheme.
As for profit on business. What is that concern to them ? As long as you stick within the operating boundaries they laid out then you're fine. Its not as if there hasn't been loopholes in the system before (dividends anyone ?).
I'll wait to see what the accountant says.
The limit is £150,000 ex vat for applicability of the scheme.
They wont mind if you really find a loophole, but IMHO this isnt one as you are working within the boundaries, but it would be very very exceptional for a company to turnover just *under* £150,000 and still profit £120,000. Even more so to put 100% profits for the year into a Ferrari. As for profit on the business it will interest them from the point of view that if you submit figures that *look* dodgy they will be highlighted for investigation, especially before they write out a cheque for thousands of pounds.
Your accountant would also advise that on £120k profit you would also be looking at a hefty Corporation Tax bill.
I am not trying to rubbish your idea, but you have asked in an open forum when people think of your idea. My response is based on my personal experience with the Flat Rate Scheme and degree level accounting skills.
By all accounts try your own accountant though. I dont think this scheme will work but he will have access to others which would benefit you.
>> Edited by justinp1 on Wednesday 17th May 11:06
justinp1 said:
The limit is £150,000 ex vat for applicability of the scheme.
They wont mind if you really find a loophole, but IMHO this isnt one as you are working within the boundaries, but it would be very very exceptional for a company to turnover just *under* £150,000 and still profit £120,000. Even more so to put 100% profits for the year into a Ferrari. As for profit on the business it will interest them from the point of view that if you submit figures that *look* dodgy they will be highlighted for investigation, especially before they write out a cheque for thousands of pounds.
Your accountant would also advise that on £120k profit you would also be looking at a hefty Corporation Tax bill.
Firstly, the limit is £225,000. It does say £150,000 to apply, but this can be increased to £225,000 at which point you must leave the scheme.
Secondly, where's the £120,000 profit come from ? I was talking buying a car for say £100k & selling at £100k, therefore all profit would be made on the VAT scheme, so only around £10k.
However, on a seperate note, is it really that odd for a £150k turnover company to have profits of £120k ? I don't think so. What about all the 'consultants' out there who basically provide nothing but there time. Everything they charge would be seen as profit, less a few expenses.
Right after reading through HMRC again then a motor dealer can reclaim the 17.5% input tax but must charge and pay back 17.5% on the sale price (as stated above). However, you intend to drive the vehicle and as such as soon as it is used for private use you will have to pay tax on that useage. So basically as long as you sell it for more than you paid for it you're in profit before tax etc. I mean there are a lot of people out there who do speculate on cars so a profit can be made out of it but its not through making a profit out of VAT.
I've tried to follow this, guys, but it's given me a bit of a headache.
At the risk of being shot down, isn't it a bit souless to be trying to get a supercar on the cheap? Supercars are about excess. Surely you should be blowing huge wads of cash and not giving a rats ass? That's more in the spirit of Italian supercar ownership.
Simon's probably a great example of how not to do it, but what style!
The above is meant in good humour and not intended to cause offence (apart from the bit about Si, obviously!).
At the risk of being shot down, isn't it a bit souless to be trying to get a supercar on the cheap? Supercars are about excess. Surely you should be blowing huge wads of cash and not giving a rats ass? That's more in the spirit of Italian supercar ownership.
Simon's probably a great example of how not to do it, but what style!
The above is meant in good humour and not intended to cause offence (apart from the bit about Si, obviously!).
hobo said:
So instead of setting yourself up as a car dealer you set yourself up as a car leasing/hire company. It is then possible.
When you want to use the car 'personally' you just hire it from the company.
Simple really.
No ?
I recall one successful VAT tribunal case where a similar business was set up and VAT reclaimed on a number of exotics. The big but is that you will have to satisfy HMRC that there cannot be any private use. In the successful case [sorry cannot remember the name] the cars were kept in a secure warehouse away from the directors home and were trailered to wherever they were needed so there was no road use at all. I think this helped prove that the cars were used for the purposes of the business and not used for personal benefit. This was a worthwhile exercise for a substantial business but is not likely to be cost effective for one car.
Also, if you do set up a company and 'hire' the car for a day or weekend, you will need to pay a commercial rental fee.
Hobo said:
The limit is £150,000 ex vat for applicability of the scheme.
They wont mind if you really find a loophole, but IMHO this isnt one as you are working within the boundaries, but it would be very very exceptional for a company to turnover just *under* £150,000 and still profit £120,000. Even more so to put 100% profits for the year into a Ferrari. As for profit on the business it will interest them from the point of view that if you submit figures that *look* dodgy they will be highlighted for investigation, especially before they write out a cheque for thousands of pounds.
Your accountant would also advise that on £120k profit you would also be looking at a hefty Corporation Tax bill.
Firstly, the limit is £225,000. It does say £150,000 to apply, but this can be increased to £225,000 at which point you must leave the scheme.
Secondly, where's the £120,000 profit come from ? I was talking buying a car for say £100k & selling at £100k, therefore all profit would be made on the VAT scheme, so only around £10k.
However, on a seperate note, is it really that odd for a £150k turnover company to have profits of £120k ? I don't think so. What about all the 'consultants' out there who basically provide nothing but there time. Everything they charge would be seen as profit, less a few expenses.
I agree, and dont doubt the possibility that it can happen, but what you may find is that transactions and circumstances deemed 'out of the ordinary' or just within the tax boundaries by any of the tax offices, will probably mean that all of your accounts will be looked over in fine detail, so you run the risk of having the meal you paid for in 2002 being scruitinised for your honesty in reporting exact details!
Good luck to you if you can pull such a scheme off, and indeed if you are a consultant or similar and have the books which are 100% kosher to support what you are saying to the taxman, otherwise my advice is to be wary to highlight youself in this way!
I do remember a case where the owner of a lambo successfully proved that due to the impression created it was useful to his job and thus partly tax deductable. It can be done, but is rare and costly, and for every case that has been planned and has worked there are ten which have not stood up to scruity and the company owner has ended up in hot water and more out of pocket then if he hadnt bothered.
Good luck!
Gassing Station | Supercar General | Top of Page | What's New | My Stuff