VAT registered companies and restoring/modifying cars
Discussion
I've wondered about this for a while (and I should point out it's just speculation, I'm not in a position to do this), could you:-
- Set up a company to sell something to do with cars
- Sell a car to the company to use to display the products and act as advertisement
- Register company for VAT
- Restore/modify the car and claim VAT back on costs due to it being used commercially
Again, I'm certainly not going to do this - and I'm sure someone will point out why this would be fraudulent early doors.
I have a few thoughts of my own as to why this wouldn't work but want to leave it open to discussion.
- Set up a company to sell something to do with cars
- Sell a car to the company to use to display the products and act as advertisement
- Register company for VAT
- Restore/modify the car and claim VAT back on costs due to it being used commercially
Again, I'm certainly not going to do this - and I'm sure someone will point out why this would be fraudulent early doors.
I have a few thoughts of my own as to why this wouldn't work but want to leave it open to discussion.
Some interesting case studies from the Gov website...
Ava Knit Ltd VTD 1461
A company had its claim to input tax on the cost of a personalised numberplate disallowed. The numberplate reflected the name of the director and not the company’s name. The tribunal held that the numberplate was bought for the personal pleasure of the director, not the purposes of the company’s business.
BJ Kershaw Transport Ltd VTD 1785
A company that was named after its controlling director bought a numberplate that reflected their initials. The tribunal found that the relationship between the numberplate and the company was weak. Therefore, the numberplate could not reasonably be expected to promote the company. Input tax could not be recovered on the cost of the numberplate.
Tamburello Ltd VTD 14305
The company bought three cars for leasing. One car was leased to an associated company. The other two cars were leased to a company as a result of a personal friendship between the directors of the two firms. All the cars were leased for less than a commercial value.
The tribunal held that input tax could be claimed on the purchase of the cars. Although the rental payments were below what would be expected in an arms-length commercial transaction, the company had also received interest-free loans from the lessees. Looking at the situation as a whole the company would get a reasonable commercial rate of return for taking part in the transaction.
Trade Development Associates VTD 12699
A management consultancy business upgraded the engine of a car to allow it to achieve a top speed of 175 mph. The tribunal held that input tax on the cost of upgrading the engine was not deductible.
The tribunal also held that there was no direct association between the business of a management consultancy and upgrading, rather than repairing, an engine simply to allow the achievement of driving speeds way in excess of the speed limit. Therefore the cost of upgrading the engine was not for the purposes of the business.
Ava Knit Ltd VTD 1461
A company had its claim to input tax on the cost of a personalised numberplate disallowed. The numberplate reflected the name of the director and not the company’s name. The tribunal held that the numberplate was bought for the personal pleasure of the director, not the purposes of the company’s business.
BJ Kershaw Transport Ltd VTD 1785
A company that was named after its controlling director bought a numberplate that reflected their initials. The tribunal found that the relationship between the numberplate and the company was weak. Therefore, the numberplate could not reasonably be expected to promote the company. Input tax could not be recovered on the cost of the numberplate.
Tamburello Ltd VTD 14305
The company bought three cars for leasing. One car was leased to an associated company. The other two cars were leased to a company as a result of a personal friendship between the directors of the two firms. All the cars were leased for less than a commercial value.
The tribunal held that input tax could be claimed on the purchase of the cars. Although the rental payments were below what would be expected in an arms-length commercial transaction, the company had also received interest-free loans from the lessees. Looking at the situation as a whole the company would get a reasonable commercial rate of return for taking part in the transaction.
Trade Development Associates VTD 12699
A management consultancy business upgraded the engine of a car to allow it to achieve a top speed of 175 mph. The tribunal held that input tax on the cost of upgrading the engine was not deductible.
The tribunal also held that there was no direct association between the business of a management consultancy and upgrading, rather than repairing, an engine simply to allow the achievement of driving speeds way in excess of the speed limit. Therefore the cost of upgrading the engine was not for the purposes of the business.
I own a small engineering consultancy. My cars are a hobby and I've never attempted to claim any expense for them (or anything else that's not strictly correct). I've heard of individuals making claiming costs that seem totally ludicrous, such as butcher claiming the cost of flying lessons. But, I've also been told by a previous accountant that once HMRC have any indication that you are less than honest they will make things hard for you for the rest of your life. The gain from a spurious claim would have to be big to justify that risk.
Can't see a problem if it truly is genuine.
My local specialist garage has two track specced cars with branding on that they take to local circuits and offer passenger rides to customers etc on open days.
They obviously use them also in a personal capacity too (for track days).
I don't know if they are privately owned or owned by the company, and I don't know if they claim any of the parts but are also getting into reselling and fitting some of the brands that they test on their cars.
My local specialist garage has two track specced cars with branding on that they take to local circuits and offer passenger rides to customers etc on open days.
They obviously use them also in a personal capacity too (for track days).
I don't know if they are privately owned or owned by the company, and I don't know if they claim any of the parts but are also getting into reselling and fitting some of the brands that they test on their cars.
Employees personal tax liability for car provided by employer
Employer's liability for NI payments on car provided.
My accountant told me it wasn't worth my company providing me with a car, we (the company and I) would both be better off by procuring the car myself and claiming 45p a mile.
Employer's liability for NI payments on car provided.
My accountant told me it wasn't worth my company providing me with a car, we (the company and I) would both be better off by procuring the car myself and claiming 45p a mile.
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