Commercial Vehicles - Avoiding VAT

Discussion in 'Accounts & Finance' started by willparker, Apr 24, 2008.

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  1. willparker

    willparker UKBF Newcomer Free Member

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    Hi

    I am looking for advice on reclaiming VAT on a commercial vehicle. I note an article on the internet which stated that on all 4100 UK sales of a Mitsibushi L200 pick-up in 2006, (over 1 tonne payload, so classified as commercial vehicle), each and every purchase claimed back the VAT. Surely each and every sale was not to a registered business.

    I would like to buy an L200 or similar and would obviosuly like to avoid paying the VAT if possible. I am currently in full-time employment.

    My brother is a VAT-registered farmer however and I was wondering if it would be easy / advisable to purchase the vehicle through his business, allowing me to reclaim the VAT?

    I also have a side-hobby of breeding donkeys which does little more than break-even - would it be worth considering registering that as a business in order to reclaim the VAT?

    Any advice on this matter would be greatly appreciated as I'm a little confused...:|

    Kind Regards

    Will
     
    Posted: Apr 24, 2008 By: willparker Member since: Apr 24, 2008
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  2. Philip Hoyle

    Philip Hoyle UKBF Ace Free Member

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    Only a VAT registered business can reclaim input VAT. Your farmer relative couldn't do it as it would either have to remain owned by him or he'd have to sell it to you, charging you the VAT.

    The article you have seen is garbage I'm afraid. There is absolutely no way that anyone would know that the VAT paid on the purchases of the vans was reclaimed by VAT registered businesses. Such statistics are simply not available. HMRC don't check every invoice for which VAT is claimed - in fact they will only ever see a tiny fraction of invoices supporting VAT claims - and they have no way of collating such information from even the invoices that they see.

    Don't believe everything you see on the internet!
     
    Posted: Apr 24, 2008 By: Philip Hoyle Member since: Apr 3, 2007
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  3. estwig

    estwig UKBF Legend Free Member

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    But the fella found it through Google, so it must be true!!
    ;)
     
    Posted: Apr 24, 2008 By: estwig Member since: Sep 29, 2006
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  4. willparker

    willparker UKBF Newcomer Free Member

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    Thanks very much for your reply.

    So do you think that getting my relative to buy and own it on behalf of me whilst I pay him the money would be too 'dodgy'? I guess insurance purposes would make it very difficult..?

    BTW it was actually the Daily Telegraph site, guess they have to sell their papers!!
     
    Posted: Apr 24, 2008 By: willparker Member since: Apr 24, 2008
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  5. DavidT

    DavidT UKBF Newcomer Free Member

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    I did actually recently read a posting on the L200 Ute/Pickup and regarding the tonnage (adding a canopy means it no longer can be classed as commercial). Certainly nothing claiming VAT claims were made on all.

    That aside... I am with Philip on this one. If it is for personal use, which your email indicates it is not really for business use, you will have to pay the VAT.

    What is it with people today? I saw another on getting the VAT back on a TV for personal use... will people start asking about it now as though they can get it back on all their everyday items?

    David Toohey
    The Accountants Circle
    Asset Management System | Budget & Projection System | Cash Book System | Management Accounts Template
     
    Posted: Apr 24, 2008 By: DavidT Member since: Aug 16, 2007
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  6. 3pic

    3pic UKBF Newcomer Free Member

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    Donkey breeding is an exempt business activity for VAT purposes - no VAT charged or reclaimed.

    Whats going on?. This is like the 3rd poosting in as many days with people wanting to avoid VAT. Someone wanted a 42" plasma TV yesterday.:rolleyes:
     
    Posted: Apr 24, 2008 By: 3pic Member since: Jun 20, 2007
    #6
  7. KM-Tiger

    KM-Tiger UKBF Legend Full Member - Verified Business

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    Perhaps a sign of price/tax inflation running well ahead of earnings?
     
    Posted: Apr 24, 2008 By: KM-Tiger Member since: Aug 10, 2003
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  8. 3pic

    3pic UKBF Newcomer Free Member

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    OP - If your brother purchases and reclaims the VAT, HMRC will want to see evidence of it on the farm or if 'sold' they'd want evidence that it was sold and VAT charged - if not, they'll want the VAT previosuly reclaimed back.

    Even if brother buys the vehicle himself, if it is used mainly for a business use then it will be deemed for personal use. It is very common for farmers to try all sorts of tricks (ie, £60k range rover sport 'used' on the farm, etc all fail at the tribunal/High Court).

    It is very high risk, farmers a re constantly on HMRC's radar due to all the scams this sector pulls. Use of rebated (red diesel) in non-farm vehicles, vehicles used for personal benefit, etc.

    PS. Deliberate avoiding VAT is also illegal and subject to criminal prosecution. Hardly worth it for £3k of VAT.
     
    Posted: Apr 24, 2008 By: 3pic Member since: Jun 20, 2007
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  9. willparker

    willparker UKBF Newcomer Free Member

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    Thanks for the reply - as you may have guessed I have no experience in these matters so apologies for the dumb questions. That's cleared it up for me anyway.
     
    Posted: Apr 24, 2008 By: willparker Member since: Apr 24, 2008
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  10. DavidT

    DavidT UKBF Newcomer Free Member

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    It's not a dumb question as such... don't feel worried about that.

    The only thing is, VAT is there for the consumer... the end user. When that is the case, there are no real legal ways to get around it and trying to do is can just be asking for trouble.

    I, and others I am sure, would hate for you to leave the forums thinking we were really having a go at you. If you do have questions, things you are unsure of and want to know... ask away and I'm sure most of us will give it our best shot to answer.

    David Toohey
    The Accountants Circle
    Accountancy & Bookkeeping Forums | Accountant & Bookkeeper Blogs | Accounting Templates | Find Me an Accountant
     
    Posted: Apr 24, 2008 By: DavidT Member since: Aug 16, 2007
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  11. Jaydee

    Jaydee UKBF Enthusiast Free Member

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    If you are more worried about paying the VAT than obtaining a warranty etc, surely the simple solution is to purchase a used one from either a private individual or from a non-VAT-registered business - that way they have suffered the VAT cost and therefore you do not.
     
    Posted: Apr 24, 2008 By: Jaydee Member since: May 27, 2007
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  12. willparker

    willparker UKBF Newcomer Free Member

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    That's an interesting point which raises another question for me:

    If I buy a commercial vehicle and suffer the VAT cost, when I then come to sell my vehicle a few years down the line, am I not entitled to recoup that VAT which I paid, like I would for any non-commercial verhicle. ie. is it correct that for a commercial vehicle with depreciation of x% my used value would be:

    Used value = ( New value - VAT ) * x

    As opposed to the below for a non-commercial vehicle:

    Used value = New value * x
     
    Posted: Apr 25, 2008 By: willparker Member since: Apr 24, 2008
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  13. Jenni384

    Jenni384 UKBF Big Shot Full Member

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    Sorry, Will. :(
    If you ain't VAT registered, you aint entitled to nothin'!

    As a regular consumer, whether you are buying a 'commerical' vehicle or not, the VAT become irrelevant and the price anyone pays is gross. Any VAT element just becomes part of the gross price.

    As has already been mentioned, VAT is a tax on the end consumer, and anyone who is not VAT registered just has to suffer it.

    Sorry!:p
     
    Posted: Apr 25, 2008 By: Jenni384 Member since: Oct 1, 2007
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  14. Brian283

    Brian283 UKBF Newcomer Free Member

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    Hi,
    I am currently looking at several commercial jeeps in the UK. Does anyone know how easy it is to claim VAT back from the HMRC using an Irish VAT number.
    Thanks
     
    Posted: May 8, 2008 By: Brian283 Member since: May 8, 2008
    #14
  15. Brian283

    Brian283 UKBF Newcomer Free Member

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    I found this PDF document that states in section 4 once you have a EU VAT number that's obviously not from the UK you are eligible not to pay any tax. Does anyone know if this is different with regards to second hand commercial vehicles?

    Type in "Notice 725 The Single Market" into Google and click the first link, this will bring you to the PDF document. The relevant article is in section 4
     
    Posted: May 8, 2008 By: Brian283 Member since: May 8, 2008
    #15
  16. 3pic

    3pic UKBF Newcomer Free Member

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    Brian,

    If you are VAT registered in Ireland, all you need to do is provide your Irish VAT number when ordering the vehicles from the UK supplier.

    They will then zero rate the invoice - that is, not charge you VAT.

    Upon receipt of invoice, you do something called 'reverse charge'. Basically, you take the UK invoice with no VAT on it and then :-

    1. Convert the invoice values from £ into Euro's if not already.
    2. Calculate the VAT at the Irish rate on the total invoice amount.
    3. This VAT amount is then paid over to Irish VATman on your VAT return.
    4. You also reclaim the same amount of VAT on the same VAT return.

    In effect, the VAT goes in and out at the same time and so the overall outcome is Nil - but most importantly, you are accounting for the VAT in your own country. This assumes you are a fully taxaxble trader (ie, everything you sell you charge VAT on).

    So you have no need to interact with the HMRC at all and simply process it through your own return.
     
    Posted: May 9, 2008 By: 3pic Member since: Jun 20, 2007
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  17. Brian283

    Brian283 UKBF Newcomer Free Member

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    That's what I thought regarding taking it out of the UK. I see no need to pay VAT on it in Ireland, as all you have to do is register the vehicle and your ready to go. Unless HMRC checks to make sure it is being registered to the business which I cant see them doing.
     
    Posted: May 9, 2008 By: Brian283 Member since: May 8, 2008
    #17
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