Vehicle expenses – VAT and Self Assessment
Discussion
I am currently self employed and voluntarily VAT registered (my profits do not exceed the threshold). I have just changed vehicles and am trying to work out the most advantageous way of calculating both my VAT and SA.
I believe I am correct in saying that I can either use the 45/25ppm basis or the actual cost on an apportionment basis so long as I am consistent throughout the ownership of the vehicle, for the purposes of SA.
I was not previously VAT registered and so only had SA to consider, and on that basis from preliminary calculations I believe that it would be more advantageous to use the 45/25ppm basis but I am having difficulty working out what the position is when VAT is considered.
I have the following queries:
1. Assuming that I am correct and the 45/25ppm basis is the most advantageous (I will have to crunch the numbers fully) upon which basis should I/am I allowed to reclaim VAT on vehicle running costs?
2. The Fuel Scale Charge basis, due to my mileage and the frugality of my car appears to require me to pay more than the amount that I would generally be able to reclaim in respect of VAT (Car is a diesel 166g/co2) so that does not seem to be the way to go, can I therefore apportion my business costs and reclaim that element of VAT?
3. If I apportion fuel costs must I also apportion all other running costs and reclaim that element of VAT? Because I believe that if you use the FSC you can reclaim the VAT on all other running costs so long as the business pays for them, without there being a deduction for private use.
4. Further to 3 above, can I mix and match, ie apportion the VAT of fuel cost but still reclaim the full amount of other running costs? I presume not.
5. If I elect not to reclaim the VAT on fuel can I then elect to reclaim VAT on a 100% basis on all other running costs as I would not be mixing and matching?
6. Based upon what I must/may do in relation to VAT can I still claim the full amount when offsetting against my SA – ie can I still claim 45/25ppm or must I make a reduction if I am reclaiming fuel? There is a clear benefit to me using the 45/25ppm basis if I am allowed to do so.
7. Is any of this impacted by my choice to use 45/25ppm basis rather than an actual cost apportionment basis?
Many thanks in advance.
I believe I am correct in saying that I can either use the 45/25ppm basis or the actual cost on an apportionment basis so long as I am consistent throughout the ownership of the vehicle, for the purposes of SA.
I was not previously VAT registered and so only had SA to consider, and on that basis from preliminary calculations I believe that it would be more advantageous to use the 45/25ppm basis but I am having difficulty working out what the position is when VAT is considered.
I have the following queries:
1. Assuming that I am correct and the 45/25ppm basis is the most advantageous (I will have to crunch the numbers fully) upon which basis should I/am I allowed to reclaim VAT on vehicle running costs?
2. The Fuel Scale Charge basis, due to my mileage and the frugality of my car appears to require me to pay more than the amount that I would generally be able to reclaim in respect of VAT (Car is a diesel 166g/co2) so that does not seem to be the way to go, can I therefore apportion my business costs and reclaim that element of VAT?
3. If I apportion fuel costs must I also apportion all other running costs and reclaim that element of VAT? Because I believe that if you use the FSC you can reclaim the VAT on all other running costs so long as the business pays for them, without there being a deduction for private use.
4. Further to 3 above, can I mix and match, ie apportion the VAT of fuel cost but still reclaim the full amount of other running costs? I presume not.
5. If I elect not to reclaim the VAT on fuel can I then elect to reclaim VAT on a 100% basis on all other running costs as I would not be mixing and matching?
6. Based upon what I must/may do in relation to VAT can I still claim the full amount when offsetting against my SA – ie can I still claim 45/25ppm or must I make a reduction if I am reclaiming fuel? There is a clear benefit to me using the 45/25ppm basis if I am allowed to do so.
7. Is any of this impacted by my choice to use 45/25ppm basis rather than an actual cost apportionment basis?
Many thanks in advance.
Eric Mc said:
What has your accountant advised?
You do realise that VAT registration has nothing whatsoever to do with profits?
Eric, quite right, it was a typographical error, I should have said turnover rather than profit. I have not registered as a result of going over that threshold however. It is a voluntary registration.You do realise that VAT registration has nothing whatsoever to do with profits?
I will be doing my VAT and SA returns myself, I am simply canvassing views as the revenue guidance on the points I raise is not particularly clear and I was hoping that someone with practical experience of dealing with this situation might provide some useful guidance.
I am quite happy to give general advice freely on PH - especially to those who may be starting out in business and have not yet signed on with an accountant. I will also offer advice to those who would not ordinarilly use an accountant, such as someone under PAYE or someone who is retired.
Your post is extremely detailed and obviously requires quite detailed advice.
I therefore would be reluctant to get involved in going through all those points in the detail you require.
Maybe you should think about engaging an accountant on a formal basis.
Your post is extremely detailed and obviously requires quite detailed advice.
I therefore would be reluctant to get involved in going through all those points in the detail you require.
Maybe you should think about engaging an accountant on a formal basis.
Eric Mc said:
I am quite happy to give general advice freely on PH - especially to those who may be starting out in business and have not yet signed on with an accountant. I will also offer advice to those who would not ordinarilly use an accountant, such as someone under PAYE or someone who is retired.
Your post is extremely detailed and obviously requires quite detailed advice.
I therefore would be reluctant to get involved in going through all those points in the detail you require.
Maybe you should think about engaging an accountant on a formal basis.
No problems at all Eric, I completely understand.Your post is extremely detailed and obviously requires quite detailed advice.
I therefore would be reluctant to get involved in going through all those points in the detail you require.
Maybe you should think about engaging an accountant on a formal basis.
The reason I included so much detail was that so often on PH people are criticised for not going into enough detail therefore not allowing people in the know to give accurate advice.
It was also to demonstrate that I have not simply come on here to ask someone else to do the work for me without having bothered to do the research myself (another common criticism on PH), I have spent a great deal of time looking at the appropriate websites but I have not found the answer to this particular issue.
If anyone else has been in a similar position and has any sage advice on how VAT deductions and SA interact in relation to vehicle running costs I would appreciate your thoughts.
Edited by soprano on Tuesday 7th June 14:23
I will offer some "general" advice on this.
If you are claiming motoring costs on the 45p/25p per mile basis, the assumption is that you are NOT using a business owned vehicle. Therefore, for VAT purposes the Fuel Scale Charge will not be applicable.
The amounts you charge to the business using the 40p/25p rates are fully allowable as business expenses for Income Tax/Corporation Tax purposes.
HMRC WILL allow an element of VAT to be reclaimed on these 45p/25p claims. The tricky part is trying to allocate the appropriate VAT vouchers against the relevant 45p/25p claim.
If any Input VAT is reclaimed on the 45p/25p expense claims, this means that the allowable amout for offset against the business profits will need to be reduced by the Input VAT reclaimed.
If you are claiming motoring costs on the 45p/25p per mile basis, the assumption is that you are NOT using a business owned vehicle. Therefore, for VAT purposes the Fuel Scale Charge will not be applicable.
The amounts you charge to the business using the 40p/25p rates are fully allowable as business expenses for Income Tax/Corporation Tax purposes.
HMRC WILL allow an element of VAT to be reclaimed on these 45p/25p claims. The tricky part is trying to allocate the appropriate VAT vouchers against the relevant 45p/25p claim.
If any Input VAT is reclaimed on the 45p/25p expense claims, this means that the allowable amout for offset against the business profits will need to be reduced by the Input VAT reclaimed.
Eric Mc said:
I will offer some "general" advice on this.
If you are claiming motoring costs on the 45p/25p per mile basis, the assumption is that you are NOT using a business owned vehicle. Therefore, for VAT purposes the Fuel Scale Charge will not be applicable.
The amounts you charge to the business using the 40p/25p rates are fully allowable as business expenses for Income Tax/Corporation Tax purposes.
HMRC WILL allow an element of VAT to be reclaimed on these 45p/25p claims. The tricky part is trying to allocate the appropriate VAT vouchers against the relevant 45p/25p claim.
If any Input VAT is reclaimed on the 45p/25p expense claims, this means that the allowable amout for offset against the business profits will need to be reduced by the Input VAT reclaimed.
Many thanks for pointing me in the right direction Eric, that's really useful.If you are claiming motoring costs on the 45p/25p per mile basis, the assumption is that you are NOT using a business owned vehicle. Therefore, for VAT purposes the Fuel Scale Charge will not be applicable.
The amounts you charge to the business using the 40p/25p rates are fully allowable as business expenses for Income Tax/Corporation Tax purposes.
HMRC WILL allow an element of VAT to be reclaimed on these 45p/25p claims. The tricky part is trying to allocate the appropriate VAT vouchers against the relevant 45p/25p claim.
If any Input VAT is reclaimed on the 45p/25p expense claims, this means that the allowable amout for offset against the business profits will need to be reduced by the Input VAT reclaimed.
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