Flat Rate VAT on van lease for delivery driver

[bigdavesellers]

As a delivery driver I'm on the flat rate VAT scheme. I lease a van for a daily fee for business purposes only. It has a payload over 1 tonne and large payload area. My new accountant says only 50% of the daily lease fee counts towards determining whether i am classed as a Limited Cost Business and that/he has put me onto the 16.5% VAT rate for the last quarter. If i can include 100% of the van lease fee i pass both the 2% quarterly threshold AND the £1,000 annual threshold for "costs". Can anyone please clarify?

 

[David Griffiths]

The 50% restriction in claiming input VAT on leases only applies to cars. I'm not aware of the rules being changed to extend the restriction to vans. If it's 100% for business use, which it seems to be, then I don't think that any restriction is required

 

[DWS]

As a delivery driver I'm on the flat rate VAT scheme. I lease a van for a daily fee for business purposes only. It has a payload over 1 tonne and large payload area. My new accountant says only 50% of the daily lease fee counts towards determining whether i am classed as a Limited Cost Business and that/he has put me onto the 16.5% VAT rate for the last quarter. If i can include 100% of the van lease fee i pass both the 2% quarterly threshold AND the £1,000 annual threshold for "costs". Can anyone please clarify?

I may be wrong but I didn’t think any lease expenses counted towards being a Limited Cost Trader as these are regarded as services.

 

[JEREMY HAWKE]

Are you sure that its a lease as daily calculations are normally only applied to long terms vehicle rental where you claim 100per cent .

I have seen this quite a bit in this industry where the turn over is very low but the costs are a high percentage of the turn over meaning that the vat claims are high but still accountants still push the FRS on these small businesses

 

[UK Contractor Accountant]

‘Limited cost traders’ are ‘labour-only’ businesses that have to use the 16.5% rate when using the Flat Rate VAT scheme. A limited cost trader is defined as one that spends less than 2% of the value of its sales on goods (not services) over the period you submit a VAT return (HMRC call this 'the accounting period' for VAT - it is usually quarterly).​

When working out the amount you have spent on goods, you cannot include purchases of:​

• capital goods (such as new equipment used in a business)
• food and drink (such as lunches for staff)
• vehicles or parts for vehicles (unless running a vehicle hiring business).

 

[DWS]

Your accountant's advice is correct. Under the flat rate VAT scheme, you can typically claim only 50% of a van lease fee towards your "costs" to determine if you are a Limited Cost Business. If you can include 100%, you may pass the thresholds, but this is uncommon.

Are you sure about that?
As far as I am aware leases are counted as services and therefore none of the expense is counted towards determining if the they are a Limited Cost trader.

 

[TheoNe]

I think you accountant is correct:

Not all purchases qualify as relevant goods. According to HMRC guidelines, certain items are excluded from this calculation, including:

• Vehicles or parts for vehicles (unless you're operating a vehicle hiring business)
• Fuel for vehicles (unless you're in the transport sector using your own or a leased vehicle)
• Services (such as accountancy fees, advertising costs, and equipment hire)
• Food and drink (for you or your staff)
• Capital expenditure (like laptops or mobile phones for business use)