Finance Reclaiming VAT

[Vet_2010]

Hey,

Hoping some of you might be able to give me some advice.

I got my Car on 18th December 2007, it was an ex honda UK car priced at £16995.
The car was being bought under my Dads own business and is in the business name and so I asked if it was VAT qualifying. I know most used cars aren't as the VAT has already been paid by the first owner, however as this was a HUK car I thought I'd check. The dealer assured me that it was VAT qualifying and made a point of when he was doing his calculations to show how much extra we would save when the VAT was claimed back.
Well earlier in the week the first payment was due and Dad rang the accountant to find out how he would claim the VAT back on it. According to the the accountant we can't claim VAT back on the car afterall!!
Now this has ended up with the car working out at £2.5k more expensive than we were expecting and than what the dealer made out it would cost. (£2.5k is what we were told we could claim back on VAT)
My question is what should we do now?
Dad rang the dealer today and he basically wasn't interested.
I really am not happy in the slightest! As far as I am concerned the delear lied to us and we bought the car under false pretenses and surely this should invalidate any contract we have with them?
I'm at uni at the moment otherwise I'd have the car straight back down to the dealer tomorrow morning!!

Cheers,

Colin

[tongie]

Your Dad's accountant is correct. Cars are not treated favourably for VAT or other taxes.

The Honda dealer may not have done anything wrong as the car may indeed be 'VAT Qualifying'. This does not mean that any VAT registered individual or company can claim it back though. However, if you were for example a car rental company or dealer this may apply to you.

Seeing as the car is yours and not related to your Dad's business it sounds like it could have been treated as tax fraud by Customs and Excise so you've probably saved yourself some pain in the long run!

You have not mentioned if you are involved in the business at all eg employee or whether don't work for the business. I would suggest your Dad speaks to his accountant again as you (or your Dad) may have a 'benefit in kind' which is subject to income tax/national insurance. HMRC inspections often look at cars owned by businesses to see who drives them.

Why don't you speak to a solicitor and explain the full circumstances to see if you have a case.

[Vet_2010]

Originally Posted by tongie

Your Dad's accountant is correct. Cars are not treated favourably for VAT or other taxes.

The Honda dealer may not have done anything wrong as the car may indeed be 'VAT Qualifying'. This does not mean that any VAT registered individual or company can claim it back though. However, if you were for example a car rental company or dealer this may apply to you.

Seeing as the car is yours and not related to your Dad's business it sounds like it could have been treated as tax fraud by Customs and Excise so you've probably saved yourself some pain in the long run!

You have not mentioned if you are involved in the business at all eg employee or whether don't work for the business. I would suggest your Dad speaks to his accountant again as you (or your Dad) may have a 'benefit in kind' which is subject to income tax/national insurance. HMRC inspections often look at cars owned by businesses to see who drives them.

Why don't you speak to a solicitor and explain the full circumstances to see if you have a case.

Cheers for the reply, it was very helpful.

To be honest as far as businesses and VAT go I know very little indeed, so I'm leaving it to my Dad and the accountant to sort out. His business is involved in the Motor trade and I am employed by the business in a minor role. The car is registered in the business name, and insured for Motor Trade, Social Domestic Pleasure, I just have the luxury of choosing the car and getting to drive it as and when I need.

It just made me feel very weary of the dealer, he kept going on to no end about how much the car was 'really costing us' with the VAT being reclaimed.

Either way I've still got a spaceship so I'm happy

[TTDegs]

At the end of the day, whilst I feel your grief, I'm afraid you have fallen into a basic mistake.

The car salesperson's job is to sell cars.
No part of that job description is likely to inculde phrases like "be aware of the minute detail of Tax implications" or "be qualified to give TAX or accounting advice".

He may have told you what he believed to be the case.

But if you went to Tesco and asked the person behind the cheese counter if you would be able to claim the tax back because you worked for a sandwhich making company, would you listen to what they told you?

I hope you get it sorted, but unfortunately I think your Dad's accountant is the person with the answers

And as tongie mentioned, might be worth chatting to them about your status as an employee with access to company cars - that can end up costing you big bucks if the car is used for social instead of purely for work...

sorry!

[NH Dan]

Originally Posted by TTDegs

At the end of the day, whilst I feel your grief, I'm afraid you have fallen into a basic mistake.

The car salesperson's job is to sell cars.
No part of that job description is likely to inculde phrases like "be aware of the minute detail of Tax implications" or "be qualified to give TAX or accounting advice".

He may have told you what he believed to be the case.

But if you went to Tesco and asked the person behind the cheese counter if you would be able to claim the tax back because you worked for a sandwhich making company, would you listen to what they told you?

I hope you get it sorted, but unfortunately I think your Dad's accountant is the person with the answers

And as tongie mentioned, might be worth chatting to them about your status as an employee with access to company cars - that can end up costing you big bucks if the car is used for social instead of purely for work...

sorry!

You beat me to it!!!

[simon1]

It's possible that if the car had been used for Business Contract Hire it may have been VAT qualifying. That saving is passed on to the hirer. But other than that, it really is a case of Buyer Beware and speak to the accountant BEFORE you hand over the cash.

[SHADEMASTER]

If you are buying a car in the UK you can not claim the VAT back, it does not matter if the car is new or second hand!

You can how ever claim the VAT back on a commercial, all vans and vehicles that can Carry more than 1000kgs

My Nissan Navara Aventura had a list price off £25200,

I got it for £19300, after getting my fleet discount of about £2000 and claiming the VAT back for about £4000

As a bonus you only pay £500 a year company car tax

[SHADEMASTER]

Another bit of bad news, the tax man will be looking for a couple of grand a year tax from you!

If i had been in you position i would have bought the car myself and charged your dads company 40p per mile for running cost, this would have covered the cost of the finance and fuel (and kept the tax man of your back)

[Vet_2010]

Originally Posted by SHADEMASTER

Another bit of bad news, the tax man will be looking for a couple of grand a year tax from you!

If i had been in you position i would have bought the car myself and charged your dads company 40p per mile for running cost, this would have covered the cost of the finance and fuel (and kept the tax man of your back)

No chance! Gordon Brown hasn't got a penny out of me to date and won't for another couple of years yet. I'm a student so don't earn enough to have to pay tax yet.

I don't think I'll ever understand this whole VAT system, sounds far to complicated, I'll leave it to the experts.
However if you say 'If you are buying a car in the UK you can not claim the VAT back, it does not matter if the car is new or second hand!' why are cars advertised as VAT Qualifying then?

[SHADEMASTER]

Originally Posted by Vet_2010

No chance! Gordon Brown hasn't got a penny out of me to date and won't for another couple of years yet. I'm a student so don't earn enough to have to pay tax yet.

I don't think I'll ever understand this whole VAT system, sounds far to complicated, I'll leave it to the experts.
However if you say 'If you are buying a car in the UK you can not claim the VAT back, it does not matter if the car is new or second hand!' why are cars advertised as VAT Qualifying then?

I have been in business for over 10 years,
When buying a car after starting my business, I noticed there was VAT on the price,
I asked my accountant if i could claim back the VAT, he said "that you can not claim VAT back on a car" (you can on a commercial vehicle)
How ever you should be able to claim tax relief on any finance payments

To this day i have never bought a car through my business!(i always bought the car my self and charged 40p a mile to the company)

Last year i decided to spend about 40k on a new vehicle, i decided on a Navara through my business (for work use) and a Type R (for weekends)

[Unknownsoldier]

[quote=Vet_2010;144774]No chance! Gordon Brown hasn't got a penny out of me to date and won't for another couple of years yet. I'm a student so don't earn enough to have to pay tax yet.[quote]

Don't think that's quite correct, even as a student you will still be liable on the tax. Because the car is not in your name, and as such is liable for tax.

Tom

[Vet_2010]

Originally Posted by Unknownsoldier

Don't think that's quite correct, even as a student you will still be liable on the tax. Because the car is not in your name, and as such is liable for tax.

Tom

I read somewhere on the Government website that you have to be an employee earning more than £8,500 a year to be liable for Company Car Tax.. Certainly wish I was earning that a year towards uni!!

[Unknownsoldier]

You personally probably won't be liable then, but your father will, as he will have to pay the tax (they won't let you go free). Also, he'll possibly be liable for other taxes (and possibly fines), as the car is being used contrary to company car regulations.

Tom

[TTDegs]

Vet - this really is a can of worms you have opened here.

If I were you (or your Dad), I would seriously sit down with the Accountant for an hour or two, and find out the best way to dig yourselves out of it

not doing (ie just ignoring it and hoping it will go away) could end up with someone (you or your Dad) with a BIG bill when the VAT man finds out.

And believe me, the VAT man will find out...

Worst case, VAT man decides to make an example of you (ie simply applies the rules that they are totally entitled to apply) and prosecutes you (or your Dad) for tax evasion.
And you really, really don't want to go there...

[Vet_2010]

Originally Posted by TTDegs

Vet - this really is a can of worms you have opened here.

If I were you (or your Dad), I would seriously sit down with the Accountant for an hour or two, and find out the best way to dig yourselves out of it

not doing (ie just ignoring it and hoping it will go away) could end up with someone (you or your Dad) with a BIG bill when the VAT man finds out.

And believe me, the VAT man will find out...

Worst case, VAT man decides to make an example of you (ie simply applies the rules that they are totally entitled to apply) and prosecutes you (or your Dad) for tax evasion.
And you really, really don't want to go there...

To be honest I don't really know much about it all, I was just a bit shocked when I was speaking to Dad on the phone and he mentioned he wans't able to claim VAT back on the Car afterall... and since it was me that encourage him to get the car I was a bit annoyed that it was going to cost more than the dealer and I had made out at the time.

Everything with regards to the business always goes through the accountant so I've no reason to believe anything is a miss. I think its more a case of me not knowing the full details and putting the bits and pieces I do know together in the wrong order

[TTDegs]

fingers crossed everything is fine then Vet