Ltd company paying for private vehicle repairs and VAT
- Thread starter JohnJones
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- Original Poster
- #11
I am struggling here and the accountant isnt't helping too much, if I have claimed for the m6 toll road for a private vehicle and that employee hasn't claimed any fuel or mileage allowance how is that a benefit in kind ? if the company cannot claim the VAT both the company and employee are out of pocket
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The vat can be claimed - the actual net costs after the vat claim should be director loan account which is then offset by the official mileage allowance claim at 45p per mile.
Have a read from a Article extract below: (and consider changing accountants!)
Ownership not relevant
Our subscriber uses his own car on company business and so didn’t give VAT a second thought when it came to paying for servicing etc. But the VAT inspector told him that as his car was used for some business travel, even though this was just a few hundred miles per year, he can reclaim 100% of the VAT paid on the maintenance costs, even if the car doesn’t belong to the company.
Example. Jim is a director of Acom Ltd. He owns his own car in which he travels 1,500 miles on business each year. As this is a fairly small proportion of his overall mileage, he only asks the company to reimburse him for the fuel he uses. And, to be fair, it also arranges and pays for his servicing which typically costs about £500 plus VAT. The company is entitled to reclaim the VAT it pays on these costs. The same would apply to repairs or other maintenance costs the company paid for.
Trap. If the company had paid Jim an allowance amounting to more than the cost of the fuel he used for business, it wouldn’t be allowed to recover the VAT on the servicing costs.
Tip. The company should arrange and pay for servicing, repairs etc. directly with the garage. It’s important that the bill is in the company’s name when claiming VAT back. It also avoids a potential PAYE trap
Have a read from a Article extract below: (and consider changing accountants!)
Ownership not relevant
Our subscriber uses his own car on company business and so didn’t give VAT a second thought when it came to paying for servicing etc. But the VAT inspector told him that as his car was used for some business travel, even though this was just a few hundred miles per year, he can reclaim 100% of the VAT paid on the maintenance costs, even if the car doesn’t belong to the company.
Example. Jim is a director of Acom Ltd. He owns his own car in which he travels 1,500 miles on business each year. As this is a fairly small proportion of his overall mileage, he only asks the company to reimburse him for the fuel he uses. And, to be fair, it also arranges and pays for his servicing which typically costs about £500 plus VAT. The company is entitled to reclaim the VAT it pays on these costs. The same would apply to repairs or other maintenance costs the company paid for.
Trap. If the company had paid Jim an allowance amounting to more than the cost of the fuel he used for business, it wouldn’t be allowed to recover the VAT on the servicing costs.
Tip. The company should arrange and pay for servicing, repairs etc. directly with the garage. It’s important that the bill is in the company’s name when claiming VAT back. It also avoids a potential PAYE trap
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- Original Poster
- #13
This is what I have been told , so I am really really confused
When the company (a separate legal person to you) pays your personal car repair costs it is discharging your personal liability this gives rise to a benefit in kind tax charge if any of these costs are claimed as company expenses or the company claims VAT on these charges.
At present your company records include as expenses your car expenses and VAT recovered on the costs and unless you want to declare the benefit in kind charges, complete the P11D forms, pay the penalties which will have arisen to date, and pay the tax and NI on the benefit charges the VAT needs to be repaid to HM Revenue & Customs, and the costs need to be charged to your loan account on the basis that they were inadvertently paid by the company in error and will not be claimed as company expenses.
If the company is reimbursing staff for business expenses these do also need to be reported on P11D forms.
My advice is that you, and any staff working for the company, charge the company for business mileage in your own car(s) at the HM Revenue & Customs approved mileage rates when you travel on company business in vehicles other than the company vans. Mileage allowances paid at the HM Revenue & Customs approved rates is tax free income for you, the company can claim tax relief on the costs and it doesn’t create any P11D reporting requirements or benefit in kind tax charges.
Certainly if you do want to claim for business mileage for the year to 31 March 2014 for all business mileage undertaken in your private cars at the HM Revenue & Customs approved mileage rates I can include this in the accounts for you.
The accountant is employed soley to complete my year end
When the company (a separate legal person to you) pays your personal car repair costs it is discharging your personal liability this gives rise to a benefit in kind tax charge if any of these costs are claimed as company expenses or the company claims VAT on these charges.
At present your company records include as expenses your car expenses and VAT recovered on the costs and unless you want to declare the benefit in kind charges, complete the P11D forms, pay the penalties which will have arisen to date, and pay the tax and NI on the benefit charges the VAT needs to be repaid to HM Revenue & Customs, and the costs need to be charged to your loan account on the basis that they were inadvertently paid by the company in error and will not be claimed as company expenses.
If the company is reimbursing staff for business expenses these do also need to be reported on P11D forms.
My advice is that you, and any staff working for the company, charge the company for business mileage in your own car(s) at the HM Revenue & Customs approved mileage rates when you travel on company business in vehicles other than the company vans. Mileage allowances paid at the HM Revenue & Customs approved rates is tax free income for you, the company can claim tax relief on the costs and it doesn’t create any P11D reporting requirements or benefit in kind tax charges.
Certainly if you do want to claim for business mileage for the year to 31 March 2014 for all business mileage undertaken in your private cars at the HM Revenue & Customs approved mileage rates I can include this in the accounts for you.
The accountant is employed soley to complete my year end
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Where does the toll road come into this? You were talking about repairs? Toll expenses on business journeys are incurred wholly on company business, so its not a taxable benefit.
Repairs to private vehicles are a benefit in kind, because you are paying the whole thing, but the car is not used just for business, so a portion of the cost of repair comes from the private use.
Ignoring the vat side of the story, if you are paying £500 towards an employees repair, this is a taxable benefit.
HMRC have their approved method of contributing for business use of 45p per mile, which is intended to cover the fuel and wear and tear - ie contribution to the repair. This is not benefit in kind (unless you pay over the 45p). Using your system, the employee could be doing 10000 miles or 10. But still getting the same contribution.
If I were you, I'd just come up with a mileage rate, its simpler!
Is this your car or an employees?
Repairs to private vehicles are a benefit in kind, because you are paying the whole thing, but the car is not used just for business, so a portion of the cost of repair comes from the private use.
Ignoring the vat side of the story, if you are paying £500 towards an employees repair, this is a taxable benefit.
HMRC have their approved method of contributing for business use of 45p per mile, which is intended to cover the fuel and wear and tear - ie contribution to the repair. This is not benefit in kind (unless you pay over the 45p). Using your system, the employee could be doing 10000 miles or 10. But still getting the same contribution.
If I were you, I'd just come up with a mileage rate, its simpler!
Is this your car or an employees?
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Hello,
I read about about this, HMRC website etc. I am not an accountant but this is how I understood it to work.
I claim the 45p a mile for the use of my own car. Which is not subject to P11d as it is at the limit set by HMRC. Paid via expense claim.
I also claim the VAT element on the fuel for the mileage. For my car the fuel element is 17p of the 45p so I claim for the VAT on the 17p part.
In addition as long as the repairs/maintenance and paid by the company and there is some business use of the vehicle then you can claim the full VAT back. I do this by charging the net amount to the Directors loan account and the vat goes through as normal. I am not 100% but I do not think this counts as a benefit in kind and is not reportable on the p11d. I need to check that though.
Pete
I read about about this, HMRC website etc. I am not an accountant but this is how I understood it to work.
I claim the 45p a mile for the use of my own car. Which is not subject to P11d as it is at the limit set by HMRC. Paid via expense claim.
I also claim the VAT element on the fuel for the mileage. For my car the fuel element is 17p of the 45p so I claim for the VAT on the 17p part.
In addition as long as the repairs/maintenance and paid by the company and there is some business use of the vehicle then you can claim the full VAT back. I do this by charging the net amount to the Directors loan account and the vat goes through as normal. I am not 100% but I do not think this counts as a benefit in kind and is not reportable on the p11d. I need to check that though.
Pete
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- Original Poster
- #16
One of the expenses she is refusing is a toll charge and telling me i have to pay the vat back or fill in a p11d as the company paying a toll charge for a private vehicle is a benefit in kind
The toll isn't an expense paid for by an employee and claimed back, it was paid on a company debit card
It is an employee's car and mine (2 different cars)
I haven't claimed mileage allowance (no one has) so I have a choice to pay up the VAT, or fill in P11d forms (although why there would be a penalty I am unsure about as they are only done once a year or I go through every journey and record separatly and make the 45p per mile claim
The toll isn't an expense paid for by an employee and claimed back, it was paid on a company debit card
It is an employee's car and mine (2 different cars)
I haven't claimed mileage allowance (no one has) so I have a choice to pay up the VAT, or fill in P11d forms (although why there would be a penalty I am unsure about as they are only done once a year or I go through every journey and record separatly and make the 45p per mile claim
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This is the correct treatment apart from the fact that the vehicle repairs have to be contracted between the company and the garage rather than just being paid by the company - the invoice has to be in the company's name.
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I'm sorry but your accountant is talking nonsense. The toll is no different from paying to park your car when visiting a customer, it is an expense incurred wholly, exclusively and necessarily (presumably) for business purposes, and is therefore a legitimate business expense and does not constitute a benefit in kind.
Likewise, any VAT incurred is recoverable, including VAT on tolls, parking, mileage and repairs and servicing.
It would be interesting to know where your accountant would propose to draw the line between business and personal - simplistically, if you leave the office (A) to get to a business destination (B), any legitimate costs incurrred to get you from A to B are business expenses and are not a benefit in kind (train, taxi, hotel overnight stay, flight, toll, parking, mileage, subsistence etc etc).
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You may find this link explaining how to report reimbursed expenses helpful http://www.hmrc.gov.uk/payerti/exb/a-z/e/expenses.htm#1
It may be that your accountant is trying to save you penalties and charges if you haven't completed and submitted any P11D forms which are required.
It may be that your accountant is trying to save you penalties and charges if you haven't completed and submitted any P11D forms which are required.
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Are the private car bills actually in the company's name? If not, this is where your problem exists with regards to P11D benefits and NI problems on the bills settled by the company.
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