Buying a van - VAT question

judygarland

As a newly VAT registered small business, I have been out and purchased a van on finance. I pick the thing up tomorrow and have been handed a copy of an invoice which is made out to the finance company from the dealer.

My understanding is that in order to claim the VAT back the invoice should be made out to myself as the buyer. The salesman has assured me that I can still claim the VAT back but I'm not so sure.

There is a small box where the dealer signs to say that the input tax has not and will not be claimed in respect of the goods sold on this invoice but will this be sufficient for HMRC purposes. I've just seen this http://www.accountingweb.co.uk/anyanswers/question/what-evidence-do-you-need-reclaim-vat-van-purchased-hp

As I've taken out finance on it, I appreciate that I am not the legal owner until all payments have been made in full so I'm confused now as to where I stand with claiming the VAT back.

Savvy_Sue

Do you have an accountant? If so, ask them. If not, I'd consider whether it would be worthwhile having one for this kind of situation! Although those who know more than me will be along soon ...

CKhalvashi

It depends on whether it's considered a van by HMRC (some smaller/specialist ones aren't), but all the VAT can be claimed back now if it's on HP. Check the model here.

One of our directors is no Nissan Navara no.3 (with canopy on it), as it's like a van, but it's more tax efficient.

CK

JasonLVC

judygarland wrote: »

As a newly VAT registered small business, I have been out and purchased a van on finance. I pick the thing up tomorrow and have been handed a copy of an invoice which is made out to the finance company from the dealer.

My understanding is that in order to claim the VAT back the invoice should be made out to myself as the buyer. The salesman has assured me that I can still claim the VAT back but I'm not so sure.

There is a small box where the dealer signs to say that the input tax has not and will not be claimed in respect of the goods sold on this invoice but will this be sufficient for HMRC purposes. I've just seen this http://www.accountingweb.co.uk/anyanswers/question/what-evidence-do-you-need-reclaim-vat-van-purchased-hp

As I've taken out finance on it, I appreciate that I am not the legal owner until all payments have been made in full so I'm confused now as to where I stand with claiming the VAT back.

If it is a lease purchase (you own the van at the end of the term), the dealer sells van to finance house and then finance house should invoice you. Finance house's first invoice will be for VAT/deposit of a few grand then your monthly invoices thereafter will have no vat on, just £x per month.

This is because a lease purchase is a sale of goods from lease house to you. Lease house charge lump sum up front which covers the vat on the van value and thereafter monthly payments are not VATable, effecively monthly loan repayments.

So you should ensure you get an invoice from the finance house. You are right to be cautious, you cannot reclaim VAT if the invoice is not addressed to you.

If this was a lease hire, you only hire the van so each month you get invoice for £x plus VAT and you reclaim the vat in full each invoice, at end of term you do not own the van.

JasonLVC

Im on my mobile at moment so hard o post detailed response, will post again tomorrow when i've got a proper keyboard.

Wywth

judygarland wrote: »

As a newly VAT registered small business, I have been out and purchased a van on finance. I pick the thing up tomorrow and have been handed a copy of an invoice which is made out to the finance company from the dealer.

My understanding is that in order to claim the VAT back the invoice should be made out to myself as the buyer. The salesman has assured me that I can still claim the VAT back but I'm not so sure.

There is a small box where the dealer signs to say that the input tax has not and will not be claimed in respect of the goods sold on this invoice but will this be sufficient for HMRC purposes. I've just seen this http://www.accountingweb.co.uk/anyanswers/question/what-evidence-do-you-need-reclaim-vat-van-purchased-hp

As I've taken out finance on it, I appreciate that I am not the legal owner until all payments have been made in full so I'm confused now as to where I stand with claiming the VAT back.

If you've not been given a VAT invoice (made out to you), you've presumably not paid any VAT ... so you can't expect to reclaim any either

JasonLVC

Example Lease Purchase agreement :-

Van costs £10 + £2k VAT = £14k
The dealer sells the van for £14k to the finance house, finance house pays dealer £14k, dealer is happy, van sold, dealer no longer involved from here on in.

Finance house will then 'sell' the van to you, as they have sold the van to you they have to charge you VAT and so the first invocie will be for £2k which they call a deposit but also covers the VAT charge. Finance house pays over the £2k to the VAT man having 'sold' the van to you. Finance house then invoices you £1k per month for 10 months (£1k x 10mths = £10k). Those 10 involcies will not be subject to VAt as it was charged up front at the start. You will have also reclaimed that VAT upfront on that 1st invoice from the finance house. No other VAT to reclaim.

At end of 10 months, title of van transfers from finance house to you. You now own the van.


if this was a lease Hire agreement where you don;t own the van at the end of the term, this is not seen as a sale of a van to you 9goods), it is a hire of a van (services), so the VAt is charged not at the start but each time the finance house raises an invoice to you, so same example as before :

Van costs £10k + £2k VAT = £12k total. You would be invoiced £1,000 + £200 VAT each month for 10 months (thus £1,000 + £200 VAT x 10mths = £12,000). You would get a VAT invoice each m onth from finance house plus VAT and you would reclaim the VAT each month so ovedr the 10 months you'd reclaim the £2k.

same outcome as before just the VAT is charged each invoice rather than all up front.

The dealer should not be telling you to reclaim VAT on an invoice that does not belong to you. The finance house, I presume, would reclaim the VAT charged to it by the dealer and the finance house then on-charges VAT to you which you also reclaim so VAT is neutral for dealer, finance house and you (as it should be, VAT has been passed on and reclaimed by each party ending with you reclaiming it as a business).

Unless you've got some strange arrangement with the dealer, this is how these things usually work, so an invoice from dealer to you but addressed to finance house is a bit odd. I'd expect an invoice from the finance house addressed to you as it is their van now and they are selling it to you over a period of months/finance.

Wywth

I've known it another way.

Dealer offers van for sale at for £10K+ £2k VAT = £12k

Punter walks in and asks for finance.

Deal is customer pays half now and half on finance, say spread over 12 months.

So dealer invoices customer for £10K + £2k VAT

This is paid as follows:

Finance house provides £5k
Customer is required to pay balance, so £5k plus £2k VAT = £7k

Or even

Finance house provides £6k
Customer is required to pay balance which is £4k + £2k VAT = £6k



Obviously customer then has to repay finance house 12 monthly payments.
But there is no VAT on loan repayments

Mistral001

Is this not a simple case of reclaiming the VAT that the finance company charges you. Can you get a VAT receipt from the finance company for each payment that you pay them?

CKhalvashi

Mistral001 wrote: »

Is this not a simple case of reclaiming the VAT that the finance company charges you. Can you get a VAT receipt from the finance company for each payment that you pay them?

You need a VAT receipt from the finance house, to put on the accounts.

I mentioned Hire Purchase, as this is the agreement we used to have with Cab Direct (e.g the vehicle was in our name from day one, so entire VAT could be claimed from day one, as taxis are same category as vans for VAT)

With Lease Purchase, you'll either need a finance agreement which states this, or a VAT invoice for each payment. Which of these the lease company offers is up to them, and could be both.

CK

martek

I bought my T5 van in December 2012 from the dealer (6 months old - look stunning, sport+s pack, ect ). Paid for it 14,998+vat. Because I'm not vat registered i can't claim vat back. I am trying to sell it atm and it doesn't happen for some reason. My quastion is: can the new owner claim VAT back as long as is VAT registered? And can i put in my advert e.g: 14,998+vat or it needs to be price without vat, cos atm the price is 17,000 and i think it puts ppls off.
Hope u understand where am i coming from?

many thanks