Charity Secondment - claiming costs plus vehicle

[Tin Robot]

Anyone creative?

I run a consultancy business that is location independent with just my wife and I in the business. We are VAT registered.

Our focus in life has significantly changed over the last few years and the time we spend in the business is diminishing.

I have been looking at Secondment. Fundamentally when we are not working we are working with a registered charity on a voluntary basis. They tell us when and where they need us and we either accept or decline the invite. This work requires travel, accommodation and other expenses such as tools and workwear, all of which we freely give. All of this is for our charity work that is done on a regular and continuous basis – averaging 3 days a week.

My thinking is that rather doing this separately it really should be done through the business. If we weren’t donating our time and resources we would be working on the business itself so there is a material impact on the business.

We have a number of expenses as part of our charitable work. This includes travel, accommodation and other expenses such as specialist tools that will only be used for the purposes of our charity work. Can this be deducted if the equipment remains the property of the business? Can we claim the mileage costs to get to our location? Can we claim accommodation costs?

Now the big one. Our charitable work is set to increase. The intention is to only do 1 12 hour day per week on the business and the rest of the week on secondment to our charitable work. Due to the distances travelled and the amount of equipment that we need to carry (e.g tools and equipment) we are considering buying a van. This would also be converted to allow us to sleep in it to avoid accommodation costs while on assignment and also to provide a workspace for us when working on the business. For transparency we may need to spend weekends in the van as well as it won’t be worth going back home. The van would also occasionally be used for business activity beyond being just having a desk to work from when we're away on assignments.

Being the eternal optimist and some cursory investigation my thoughts are that if formalise our voluntary work we should be able to:

1. Buy a van and claim the VAT and claim this it as capital expenditure. The van will be used for business and charity work only and if we did decide to ever have a holiday in it a charging structure could be created so that it wasn’t a benefit in kind.
2. Claim for conversion costs.
3. Claim for all tools and other expenses that are for use for the charitable work

As part of the secondment the business would continue to pay our salary. The business doesn’t receive any financial benefit or other incentive for the charitable work we do. If it makes any difference the van could be stickered up with our logo elements / and text if needed.

Does that make sense? We don’t want to break any rules but we would like to have the most tax efficient method for what we are doing and it is for a good cause as well.

Any advice appreciated.

 

[Scalloway]

It is my understanding that a motorhome type vehicle is classed as a private car for tax purposes so you would not be able to reclaim VAT and you would have to pay tax on it as a benefit in kind.

Have you run these proposals past your accountant?

 

[CA85]

Does that make sense? We don’t want to break any rules but we would like to have the most tax efficient method for what we are doing and it is for a good cause as well.

No, no, no. I can not get on board with this at all. You have made a lifestyle choice and you want to use personal expenses to pay less tax on your business earnings.

To be deductible for tax it needs to be wholly and exclusively for the purposes of trade. Your trade is consultancy, not voluntary (unpaid) charity work.

 

[spidersong]

A motorhome may be a car for direct tax, but the definition for VAT is different and there's no automatic bar to recovery on a motorhome as there is on a car.

That being said, VAT is only recoverable on costs incurred in the course or furtherance of a taxable business activity: doing stuff for charity is not a taxable business activity, and slapping some advertising on the side is only effective if the purpose is actually to generate trade and not just to justify some VAT recovery. The same argument has been tried and failed many times on running a yacht etc.

So a van for occasional business use but mainly for personal accommodation and charity work isn't going to fly with VAT recovery. Unless you wanted to recover the VAT and use it for taxable rental s to yourselves at a reasonable market rate in which case you'd probably soon charge yourselves more VAT than you'd actually recover, and if you're the only customers then it probably also wouldn't work and would probably give all sorts of direct tax issues also.