Claiming VAT back on a new car.
Discussion
OK, my accountant is away for a couple of weeks so I thought I would ask the knowledgable PH collective the following.
I am looking at buying a new Range Rover that will not only be used as my own car but also as a tow vehicle for work. I am looking to pay a deposit out of the business funds and finance the rest through the business, will I be able to claim the VAT back on the cost of the car, including the extras (assuming I planned to pay 17.5% of the eventual sale price of the car, the VAT element, back to the HMRC)?
For what its worth I own a garage and the car would be used occasionally for collecting cars for us to carryout work on.
Would I also be right in thinking that the deposit and finance payments will notbe subject to taxation as they will be a business expence.
I am looking at buying a new Range Rover that will not only be used as my own car but also as a tow vehicle for work. I am looking to pay a deposit out of the business funds and finance the rest through the business, will I be able to claim the VAT back on the cost of the car, including the extras (assuming I planned to pay 17.5% of the eventual sale price of the car, the VAT element, back to the HMRC)?
For what its worth I own a garage and the car would be used occasionally for collecting cars for us to carryout work on.
Would I also be right in thinking that the deposit and finance payments will notbe subject to taxation as they will be a business expence.
The usual assumption in VAT is that VAT cannot be reclaimed on the purchase of a motor car - even if there is some business useage.
There are a few exceptions -
a car purchased by a leasing company as part of its leasing stock (and never used by employees or directors or proprietors of the leasing company.
a pool car - i.e a car that is owned by a business but which is NEVER available to anyone in the organisation for non-business jpurneys. This usually implies that the car is kept ALWAYS on the business premises and is available to more than one member of staff for business journeys.
a courtesy car operated by a garage - the restrictions are similar to a pool car
a "VAT Qualifying car" - a car purchased by a car trader on which VAT can be claimed, is placed straight into trading stock when purchased and when sold VAT is charged in full to the new customer.
If VAT can be legally reclaimed when a car is purchased, then VAT must be charged when the car is eventually sold.
There are a few exceptions -
a car purchased by a leasing company as part of its leasing stock (and never used by employees or directors or proprietors of the leasing company.
a pool car - i.e a car that is owned by a business but which is NEVER available to anyone in the organisation for non-business jpurneys. This usually implies that the car is kept ALWAYS on the business premises and is available to more than one member of staff for business journeys.
a courtesy car operated by a garage - the restrictions are similar to a pool car
a "VAT Qualifying car" - a car purchased by a car trader on which VAT can be claimed, is placed straight into trading stock when purchased and when sold VAT is charged in full to the new customer.
If VAT can be legally reclaimed when a car is purchased, then VAT must be charged when the car is eventually sold.
If it was sold by the original seller in whose ownership the car fell into one of the above categories.
In addition, it could have been a brand new car being sold to you with full VAT showing on teh invoice and you were planning on using it within one of those restricted categories.
The downside of having a VAT Qualifying Car in the possession of the business is that the car MUST have VAT added to the selling price when disposing of it. In addition, if the car is disposed of without a "normal" sale e.g. an insurance write off or a director transferring the car to personal ownership, then the VAT on the Market Value/Insurance Value at the date of disposal needs to be paid to HMRC.
In addition, it could have been a brand new car being sold to you with full VAT showing on teh invoice and you were planning on using it within one of those restricted categories.
The downside of having a VAT Qualifying Car in the possession of the business is that the car MUST have VAT added to the selling price when disposing of it. In addition, if the car is disposed of without a "normal" sale e.g. an insurance write off or a director transferring the car to personal ownership, then the VAT on the Market Value/Insurance Value at the date of disposal needs to be paid to HMRC.
Edited by Eric Mc on Wednesday 7th February 12:42
I've actually got the VAT regs on Motoring Expenses as I claimed the VAT back on my car and wanted to know what the rules were. HM R&C Notice 700/64
Section 3.1
You may recover VAT in full if the car is:
1. Is a stock in trade of a motor manufacturer or dealer
2. Intended to be used primarily as a taxi; driving instruction car, or self-drive hire
3. Will be used exclusively for the purposes of your business and would not be made available for the private use of anyone
Mark
Gassing Station | Business | Top of Page | What's New | My Stuff