Business buying a motorbike

[peterh2]

I currently am the sole director of a VAT registered LTD company.

Thinking of buying a bike but have been advised it might make sense for the company to buy it. Can someone please confirm the following is correct?

1) I understand that the BIK is 20%?

2) If I buy new I can claim 100% of the VAT back but will also have to charge VAT on the sale price when I dispose of it?

3) If I buy second hand I will be unable to claim any VAT back. Will I still have to pay VAT on the sale price when I dispose of it if I have not claimed any VAT back on the purchase price?

Ideally I would like to explore option 3 as I think I will only be keeping the bike for ~6 months before upgrading so would like to avoid the depreciation issues with buying brand new.

Many thanks!

[Eric Mc]

peterh2 said:

I currently am the sole director of a VAT registered LTD company.

Thinking of buying a bike but have been advised it might make sense for the company to buy it. Can someone please confirm the following is correct?

1) I understand that the BIK is 20%? - Correct 20% of the cost of the asset.

2) If I buy new I can claim 100% of the VAT back but will also have to charge VAT on the sale price when I dispose of it? - Correct

3) If I buy second hand I will be unable to claim any VAT back. Will I still have to pay VAT on the sale price when I dispose of it if I have not claimed any VAT back on the purchase price? -

This depends. If the supplier is selling the bike to the company under a Second Hand Scheme, then no, you will not be able to claim back VAT on the purchase but you will not have to declare VAT on the sale later either.
On the other hand, if the seller is charging VAT to you in the normal way then your business will be able to reclaim that VAT. later, when it's your time to sell the bike, you will have to charge VAT on the sale price.

Ideally I would like to explore option 3 as I think I will only be keeping the bike for ~6 months before upgrading so would like to avoid the depreciation issues with buying brand new.

Many thanks!

Don't forget the Capital Allowance claim available on a bike can now be up to 100% of the cost of the bike.

[apguy]

peterh2 said:

1) I understand that the BIK is 20%?

2) If I buy new I can claim 100% of the VAT back but will also have to charge VAT on the sale price when I dispose of it?

3) If I buy second hand I will be unable to claim any VAT back. Will I still have to pay VAT on the sale price when I dispose of it if I have not claimed any VAT back on the purchase price?

1) BiK is supposed to be apportioned between the amount of personal versus business mileage. The revenue seem to accept 20% personal 80% business as a reasonable split.

2) Yup that is correct.

3) If you buy from a private seller, then there is no VAT you can re-claim, however you will need to add VAT onto your sale price when you come to dispose of it. If you buy from a dealer then they are likely to be on the VAT margin scheme, where they charge VAT only on the difference between their purchase and sale price. You can reclaim this (small) amount of VAT. Again, when you need to sell you have to add VAT on the whole amount (as you are not on the margin scheme).
It can be beneficial in this instance to buy 2nd hand from a fellow contractor as they will be charging full VAT that you can then re-claim.

[V8mate]

apguy said:

peterh2 said:

1) I understand that the BIK is 20%?

2) If I buy new I can claim 100% of the VAT back but will also have to charge VAT on the sale price when I dispose of it?

3) If I buy second hand I will be unable to claim any VAT back. Will I still have to pay VAT on the sale price when I dispose of it if I have not claimed any VAT back on the purchase price?

1) BiK is supposed to be apportioned between the amount of personal versus business mileage. The revenue seem to accept 20% personal 80% business as a reasonable split.

2) Yup that is correct.

3) If you buy from a private seller, then there is no VAT you can re-claim, however you will need to add VAT onto your sale price when you come to dispose of it. If you buy from a dealer then they are likely to be on the VAT margin scheme, where they charge VAT only on the difference between their purchase and sale price. You can reclaim this (small) amount of VAT. Again, when you need to sell you have to add VAT on the whole amount (as you are not on the margin scheme).
It can be beneficial in this instance to buy 2nd hand from a fellow contractor as they will be charging full VAT that you can then re-claim.

Sure? (bold above)
I didn't think you could claim input VAT for purchases from any business trading on a margin scheme

[apguy]

V8mate said:

Sure? (bold above)
I didn't think you could claim input VAT for purchases from any business trading on a margin scheme

I'm certainly no expert but I think the only people who can't reclaim margin VAT are motor traders, pony and livestock traders and auctioneers. I believe the rest of us can. Happy to be corrected though.

[V8mate]

apguy said:

V8mate said:

Sure? (bold above)
I didn't think you could claim input VAT for purchases from any business trading on a margin scheme

I'm certainly no expert but I think the only people who can't reclaim margin VAT are motor traders, pony and livestock traders and auctioneers. I believe the rest of us can. Happy to be corrected though.

I stay away from home quite regularly and am always able to reclaim the VAT from hotel rooms. On one occasion my usual hotel was fully booked, so I grabbed one from lastminute.com

I paid the advertised price, in my mind deducting the VAT element. However, when invoiced, I discovered that lastminute had sold it as an agent on a 'travel agent margin scheme'. No input VAT for me, so I ended up paying more than I expected (as net was equal to gross) for the hotel room.

Not happy!

[Eric Mc]

I'm pretty sure that Margin Scheme Input VAT CANNOT be reclaimed by ANYBODY.

[Tuscan Tart]

I don't think the VAT is reclaimable, I doubt very much you would find out the purchase price on the second hand bike, and therefore you wouldn't know how much the VAT element was.

Honda are doing o% finance over two years on selected models at the moment if you are interested not sure how much longer they are going to be though.

[V8mate]

Eric Mc said:

I'm pretty sure that Margin Scheme Input VAT CANNOT be reclaimed by ANYBODY.

Yep - if for no other reason than it doesn't appear on the purchase invoice as the seller is not charging the buyer any VAT on the transaction. HMRC are charging the seller VAT on his margin.