Avoiding VAT on a used car...

bigjl

I would gladly buy you a car and claim.back the VAT, though obviously i would keep it.

First law of business, there are no friends in business.

Obviously after is sold the car to you i would have to charge you VAT.

JasonLVC

sumguy wrote: »

This is my hyperthetical question...

How about you let me purchase the vehicle for you and you pay me the monies over the coming months. Perfect. Lets say its 10k with VAT. He purchased the van for me and over the next month or so I pay him back in full as promised and he signs the vehicle over to me providing me with a receipt for 10k.

In April he reclaims the VAT and forwards it on to me, additionally, in April I file my 10k receipt and receive my 28% allowance for a works vehicle.

:T Wheres the problem ?? :j

The problem is the way VAT works. You can only reclaim VAT if it is for use in the business or if the business makes an onward supply of those goods with VAT charged upon them.

Accountant purchases vehicle for £10k inclduing VAT, so that is £8,334 + £1,666 of VAT.

Accountant reclaims the £1,666 of VAT on purchase.

Accountant then sells the vehicle to you at cost price, so charges you £8,334 + £1,666 VAT which you pay him.

Accountant, having made a sale to you, has to pay the VAT of £1,666 which he just charged you, over to HMRC as output tax (VAT on the sale).

So he initially reclaimed the £1,666 on purchase and then he pays it back over to HMRC when he sells the vehicle.

If he then kicked back £1,666 to you, he'd be seriously out of pocket and exposing himself to attack from HMRC.

LandyAndy

The OP can reclaim the VAT on the purchase of th LR if he is himself VAT registered. The main down sides to being VAT registered are 1. it involves more record keeping and 2. It increases your selling prices by 20% to non VAT registered customers.

Flyboy152

property.advert wrote: »

Where do you think the VAT goes then ? just disappears ?

New the car is £20,000 plus VAT so £24,000. Second hand it is £12,000 which is actually £10,000 plus VAT.

You just cannot reclaim the VAT on a second hand purchase, though it still exists. Of course the VAT on he depreciated part has indeed vanished, into the coffers of the tax man.

VAT is not payable on the sale price of a used car. It chargeable on the difference between the purchase price and the selling price. Generally it is not reclaimable; even by VAT registered businesses.