Why should I pay VAT on crash repairs when it's not my policy?

DAF_2

Hello all,

Asking for advice here please.

A driver hit my parked, unoccupied car the other day. Car quite damaged, only just driveable as door has been knocked out of alignment and really badly dented. The driver (nice guy) came and admitted fault, apologised and said he would sort it out through his insurance. So far so good.

His insurers, Direct Line, have been on the phone and organised repairs but say that since my car is leased through my company, I will have to pay the VAT on the repairs and reclaim it myself. This VAT could run into hundreds of pounds and won't be reclaimable for three months. I run a very small business and this could be a real issue this quarter with corporation tax etc to pay already.

I have asked my accountants (sadly, not very clued in on this matter) and I have spoken to some wet behind the ears guy at HMRC about this. All they can tell me is that in cases like this, "the policyholder is liable to pay the VAT element of any crash repair bill" Fair enough - BUT - I am not the policyholder so why should my company be inconvenienced? The guy at HMRC says, "well that's what usually happens I think". !!

Why should my company cash flow be affected for three months to pay for something that a) was not my fault and b) is not related in anyway to MY insurance??

Any advice/thoughts warmly welcomed. Thank you

FlameCloud

If they pay you the vat, then you reclaim it in your next vat quarter, they would have over indemnified you.

DAF_2

I don't want anyone to pay me anything, and I don't wish to reclaim anything. I just want the driver's insurers to pay the garage direct for my repairs 100% without me getting involved in any transaction.

Quentin

It's standard practice when the claimant is vat registered.


The same thing would happen were you to claim off your own policy.


Think you going to have to swallow it


Maybe you could take out a new credit card to pay it with an interest free period which will cover the three months you have to wait - though won't you just deduct it from your VAT payable anyway when you do your VAT return?

DAF_2

I understand that it is standard practice when the claimant is vat registered. I guess that I don't consider myself to be the claimant - I'm not making a claim, the policy holder/driver of the other car is making the claim surely?

But I think you're right - I'll have to swallow it. Won't resort to taking out a credit card (but thanks for the suggestion), we'll manage to pay the VAT somehow, but it's an annoying principle that when someone else is at fault for damaging your vehicle, YOU have to end up paying something.

Quentin

DAF wrote: »

I understand that it is standard practice when the claimant is vat registered. I guess that I don't consider myself to be the claimant - I'm not making a claim, the policy holder/driver of the other car is making the claim surely?

But I think you're right - I'll have to swallow it. Won't resort to taking out a credit card (but thanks for the suggestion), we'll manage to pay the VAT somehow, but it's an annoying principle that when someone else is at fault for damaging your vehicle, YOU have to end up paying something.

Well.....you are making the claim, and are definitely the claimant!


But you don't have to wait to get the money back do you? You deduct all VAT you have paid from all the VAT you have collected when doing your VAT return and just send them the balance??