Tag Archives: accountancy

How to Reclaim VAT on Cars

How to Reclaim VAT on Cars

Reclaiming VAT on cars has always been difficult. HMRC always argued that if a car was not “wholly and exclusively” for the business, VAT could not be reclaimed. In essence, if a company car was used to travel 1 non-business mile, a reclaim of VAT was not possible. Proving that a vehicle had not ever been used privately was difficult. HMRC has, understandably, never documented what evidence it would require in to allow such a reclaim. Whilst this still remains the case, a number of recent cases have set the roadmap to allow for VAT reclaims.

One issue these cases addressed was around the intent to use a company vehicle for personal journeys. It’s next to impossible to prove personal use didn’t/won’t happen. However, if the company takes the appropriate steps, it can show that it’s intent is that the car will only be used for business purposes. If it can do that, a reclaim of input VAT should be allowed. With £5,000 of VAT to reclaim on a £30,000 car, it’s easy to see why taxpayers are keen to reclaim and HMRC are intent on blocking them. So, what do you need to do to reclaim?

1.  Insure the car for business use only

If you only insure a vehicle for business use this is a pretty strong indicator that you only intend to use it for business. Private use would leave the company directly liable for any claim arising from a private journey. As such, it can be inferred the car is intended for business use only.

2. Instruct all potential users of the car that it is to be used for business purposes only

By informing all staff that the vehicle is for business use only it goes further to back up the intent of its use. Get employees to counter sign a declaration that they agree to the restriction of use of the vehicle.

3. Insert a stipulation in employment contracts

Further enforce point two by including a clause in the contract of employment that employees agree not to use company cars for private use. They should also agree to return pool cars to the business premises at night. In 2016, the first tier tribunal, in the case of Jane Barton, sided with the taxpayer in reclaiming VAT even though her business premises was at her home address. So even though the car was kept at her home, this also doubled as her business address an was deemed acceptable.

4. Get the paperwork right

As well as employee declarations and amendments to employment contract, a detailed mileage log is invaluable to a successful reclaim of VAT. Again, a clause could be inserted in the employment contract that employees agree to log all journeys in a mileage log. Also consider having the directors pass a board resolution restricting the use of the vehicle to business use only.

Summary

If the above points are followed, a reclaim of VAT should be allowed. It’s worth noting however, some taxpayers have won their case in the First Tier Tribunal without hitting all the above points. In 2016, Zone Contractors Ltd were allowed their reclaim of VAT even though there were no restriction to the insurance policy. There were also concerns over the credibility of the mileage logs. However, the legal and physical restrictions (stipulation in the employment contracts and requiring the vehicle to be stored at business premises overnight) were enough to side with the taxpayer.

Each case is very much decided on its own merits. However, if all the above steps are taken, there should be little or no room for HMRC to argue that the car is not intended for business purposes.

What I want out of #NewryHour

In the past couple of years, the local business communities in Ireland have ramped up their engagement with other businesses on Twitter. There are numerous hashtags for numerous locations around the country where, for one hour a week, businesses get together online and throw around stories, publicise their business and offer support, and indeed entertainment, to other businesses in their area.

I have dabbled in these groups in the past to some extent without really committing. More recently however I decided to get more involved in my own local group – #NewryHour. Every Tuesday from 9-10pm, I get on Twitter and listen, ask questions and (hopefully) offer some value and help to the community.

Twitter comes in to its own in these groups I think. It has always been the biggest open cocktail party on the internet; you can literally go on and talk to anyone that’s using it. But these groups really help to narrow the focus for people.

As a business, you can gain a lot from being “at the party”. Whether it’s insights, leads, opportunities to connect and collaborate with other business or members of the community – it’s all possible in these forums.

So, with all this opportunity available to us, what do I hope to gain from using these groups?

Simple. Nothing.

I’m not there to gain. I’m there to give.

I like to think I know myself pretty well. I know where I can offer value to people and where I can’t. If you need help putting up a shelf or baking bread, I’m not your man. I’m really, really shit at that stuff. If I got involved in either of those activities, death or injury are both likely outcomes.

Now, if you need advise on ways to finance your business, to save tax, to increase your margins, to sell or buy a business, to manage your VAT and payroll – that’s right up my street. Some people get in to business because they’re great sales people, great at making things, great artists. The finance is something people pick up to some degree as they go along. But they seldom become experts in it to the extent that they are when it comes to building an app or building a house. And that’s fine; it’s not practical to do that. That’s the very reason accountants exist. We are the support team.

So, I go on to #NewryHour to offer support. To offer an opinion (or a second opinion). To offer help, in whatever form that may take – an introduction, a chat, a coffee, a recommendation, whatever. Just to help. Business is tough. Anyone that tells you any different is a liar. So if I can help in 140 characters on Twitter or in 30 minutes on the phone afterwards, I’m happy to do so.

I’m increasingly coming to the conclusion that we all have to give more than we receive. So I’m giving now because in 6 months or 6 days I might need help. Call it karma, call it not being an asshole, I think it’s just part of life and living in a community.

What I’ve found surprising though, is just how much community you can find in a simple hashtag.

 

#NewryHour happens every Tuesday between 9-10pm. Everyone is welcome. It’s not just about businesses, it’s about the whole community – schools, charities, groups – everyone can get involved. So please do.