Ltd Company to Sole Trader Vat on Van

Suzzette

Hi,

I am a limited company who is winding up and returning to sole trading.

My query is on vat on my van, will I have to repay it after deregistering for vat for my ltd co, if I am still using it as sole trader? Is there some way round this?

Cheers
Suzz

zygurat789

When the VAT registered Ltd deregistered it was treated as having sold the van to the unregistered ltd. So the VAT on sale should be declared and paid and added to the cost of the van which will be sold to the sole trader.
Some way round this, you mean tax avoidance? I'm sure someone will find a way.

Suzzette

Another thing but not sure its relevant. The van was bought by me using my own funds and registered to me on v5 and loaned to company via director loan, although invoiced to the company?

chrismac1

The answer is "Not if the CURRENT market value of the van and other assets on hand on which input tax was claimed is under £6k."

http://www.hmrc.gov.uk/vat/managing/change/cancel.htm#4

With regards to the van, the issue is not whether the original invoice was OK - sounds as if a proper tax invoice was raised but can't be sure without seeing it - but whether the input tax was claimed. Clearly it was.

VAT payable on de-registration is an issue which keeps some clients registered who would otherwise de-register. It's important no note that it is market value on de-registration date which counts, not original cost.

In practice I've had about 10 clients de-register over the past year, including one who had major property refurbishment claiming £30k of input tax in the process. Of course most of the £30k arose on services as opposed to goods but if I was sitting in HMRC towers I'd have at least kicked the tyres on that one.

So far nothing at all on any of them. By definition this is something which has to be looked at within a month or two of de-registration, as there is no way of establishing market value at date of de-registration once further business use, or even disposal, of said assets has taken place.

Suzzette

chrismac1 wrote: »

In practice I've had about 10 clients de-register over the past year, including one who had major property refurbishment claiming £30k of input tax in the process. Of course most of the £30k arose on services as opposed to goods but if I was sitting in HMRC towers I'd have at least kicked the tyres on that one.

So far nothing at all on any of them. By definition this is something which has to be looked at within a month or two of de-registration, as there is no way of establishing market value at date of de-registration once further business use, or even disposal, of said assets has taken place.

Hi, unfortunately the van is worth more than 6k. My accountant told me that I would have to repay the second hand vat value of the van immediately on dereregistration. Are you saying the clients who claimed 30K were not chased? Sorry I am a bit confused about this whole business and it seems I don't have the best of accountants at present

chrismac1

Suppose the current market value of the van is £9k. The output tax due on that is £1,500 and this should feature on your final VAT return. Now consider the position of one of my clients with a similar asset who is doing high mileage.

Give it six months and Glass's Guide will most likely give £5k or so for the value. VAT due on that is £833, so no VAT to fork out on the final return.

So the question for that client is:

"If I stay registered for the next 6 months will I fork out over £1,500 on my next 2 quarters?"

If yes, de-register now and take the £1,500 hit. If no, wait six months and then de-register.

This is box standard stuff any accountant who has spent any time at all studying VAT should be telling you. What I am saying is that I am surprised that this appears to be an area HMRC are not chasing, especially when you consider some of the really silly trivial stuff they do chase that drives folk like me up the wall at times.

Suzzette

Thanks again ChrisMac1, I understand your first post now.

Unfortunately it would seem I have been given poor advice from my accountant, who has already cost me money for failing to tell me that the goods I buy from mainland Europe should have been zero rated and failed to declare the goods on any vat return he has done for me.

He also advised me that I could dip in and out of vat registration without any consequences.

Failed to reclaim vat on services (rent and accountant fees) 6 months prior to registration saying that I would have to prove that this service contributed to sales post registration.

Told me that I could not reclaim vat (on my first return) on tools bought for my business because i bought them in my own name etc.


So now decided to go back to sole trading and self assessment, loosing the accountant and vat.

Thanks again for your advice!!!!

Pennywise

Those are pretty fundamental, but basic errors. Were your accountants properly qualified (i.e. chartered)? Anyone can call themselves an accountant whether qualified/experienced or not! If they're chartered, and you've lost money from their poor advice, then you should make a complaint to their regulatory body.

Suzzette

Hi Pennywise,

They claim to be chartered.

Do you think a complaint on the issues mentioned would be upheld.

I am really frustrated about the VAT on European goods because it has really lost me money, which, I will not now get back unless I write to the tax authorities in each country to reclaim it.

chrismac1

Suzzette, note that if you have identified errors on a previous VAT return, you have 4 years to make amendments within the workings of a VAT return. So if your current VAT quarter ends on 31 Dec 13, you can include amended VAT for any invoice going back to 1 Jan 2010.

Only if the VAT adjustment exceeds £10k do you have to inform HMRC separately, and even that is one of their better forms.

This is very common - for example lots of VAT-registered people (and their accountants) don't know that the 45 pence per mile includes about 2.5 pence for VAT, so I get off to a good start with new clients by doing a 4 year backdate on that if it's been missed.

Suzzette

Thanks again ChrisMac

So I assume I can get them to claim for the services they left out and the European Vat can be offset in the next vat return.

I have never received vat on mileage, I was told it was to low and there was some sort of sliding scale that didn't make it worth while.

The more I read on this forum the more annoyed I am getting with this accountancy firm.