VAT on finance purchased vehicle

jorainbow

Hi there - I would appreciate some assistance please if possible. I am helping an acquaintance with some book keeping for his new business and I am a little concerned at the following. His business is car rental. The directors are obtaining finance in their names to purchase the cars, the cars are then put in the business name with the DVLA and the VAT is then being claimed back. Is this right? Something is niggling at me and this is a bit out of my league. Any help would be gratefully received. Regards

James_Trimby

Hi, Not an uncommon problem but larger as obviously obtaining far more cars than a normal business would. To claim VAT back you need a VAT invoice which must include specifics includings the name of the customer (in your case the company). If this is a director and not the name of the company you have a problem ! (also you will have the company meeting the liability of a director every time it pays a bill which has PAYE consequences etc). I often suggest that the documents are all drawn up with the company name as the house name (and rest of company address) so liability appears to belong to company but lease/agreement still in directors name for legal purposes. BUT okay with this for mobile phone contracts not 10 cars !

In reality they are not "cheating" they are just dealing with the reality that a new company is not going to be able to take out finance. Unfortunatly an officious inspector from Customs would not see it that way (and there are still many that fit this description!). I would suggest the directors talk to the finance companies about taking a company agreement with personal guarentees instead of as currently. It should be possible especially if puting a lot of bussiness their way.

I have made lots of assumptions here so please take these as hints not advice Best of Luck