Claiming VAT back on a vehicle bought personally

Nathanb

Hi the title doesn’t explain properly what I’m looking at doing.

im starting up my own business and need to purchase a vehicle however because my business is brand new I can’t get finance but I want to claim vat back as my business is going to be vat registered.

How do I go about purchasing it personally but putting it into the business and claiming the vat back.
it is going to be 100% for business use so I want it to be a business expense I just need to get the finance personally.
i have asked the dealership if I could do a directors guarantee, but because my business is literally a day old they won’t do.

any help in this would be really appreciated I’m panicking that I can’t claim the vat back and probably won’t be worth me going vat registered. 

Sibbers123

You need a VAT invoice in the businesses name (assuming this is a limited company). When you say 'vehicle' do you mean commercial vehicle (i.e. van)?

Why not take out personal loan - loan money to company to by vehicle?

Penguin_

As above get a personal loan & use it as a directors loan in the companies accounts.

Grumpy_chap

You should take advice from your Accountant on whether it is appropriate to register for VAT (and the best timing for that) and also the BIK impact of a company van versus other options for claiming mileage.

The VAT rules do permit start-up costs in a time period ahead of VAT-registration to be recovered - I am unsure of the exact rules in this regard.

You can use the Director's Loan account to introduce funds to the business allowing the business to buy the van directly.

Rules for claiming VAT on a vehicle are not as straightforward as simply recovering all the VAT.  There are specific requirements to be followed.

Is your business plan sufficiently robust and tolerant of external forces that investing in a large capital expense ahead of generating income is wise?  Do you have any type of vehicle that could be used in the interim to allow the business to establish?

I am sure others will be along shortly that can give more details on the above points, or the information is available through the HMRC website in relatively lay terms.  Ultimately, because, there are several inter-twinned consideration, engaging an Accountant would be wise.  If it is a choice between £1k for an Accountant or a £1k cheaper van, the Accountant may be the best investment for the business.

Penguin_

Grumpy_chap said:

You should take advice from your Accountant on whether it is appropriate to register for VAT (and the best timing for that) and also the BIK impact of a company van versus other options for claiming mileage.

The VAT rules do permit start-up costs in a time period ahead of VAT-registration to be recovered - I am unsure of the exact rules in this regard.

You can use the Director's Loan account to introduce funds to the business allowing the business to buy the van directly.

Rules for claiming VAT on a vehicle are not as straightforward as simply recovering all the VAT.  There are specific requirements to be followed.

Is your business plan sufficiently robust and tolerant of external forces that investing in a large capital expense ahead of generating income is wise?  Do you have any type of vehicle that could be used in the interim to allow the business to establish?

I am sure others will be along shortly that can give more details on the above points, or the information is available through the HMRC website in relatively lay terms.  Ultimately, because, there are several inter-twinned consideration, engaging an Accountant would be wise.  If it is a choice between £1k for an Accountant or a £1k cheaper van, the Accountant may be the best investment for the business.

It's 4 years for goods that you still have, or 6 months for services.

Jeremy535897

There are two questions you have not answered, which will affect the responses:

• is the vehicle a car or a commercial vehicle? There is a prohibition on the recovery of VAT on cars, although certain pickups can qualify
• is the business to be a sole trade or a limited company?

Nathanb

The company is a limited company and the vehicle is a van.
i know I’m going to earn enough money to cover the van as it’s doing exactly what I do now for 4-5 times the money.
the problem is with getting a loan is that I have to pay APR.
if I get a new van I can get it at 0% APR.

Jeremy535897

To recover the VAT, normally the limited company has to buy the van. The invoice for the van needs to be in the company's name, and the van needs to be registered in the company's name. There is nothing that prevents you taking out a loan to lend to the company to enable it to buy the van.

There is some scope for claiming where a third party pays for the asset. This example is from https://library.croneri.co.uk/cch_uk/bvr/19-015

"Example 1: Business asset purchased by trustees

Mr King is a sole trader farmer in Dorset and is a beneficiary of a discretionary trust, which was settled by his grandmother. The trustees pay for a new combine harvester, which Mr King purchases from the UK distributor. Mr King is VAT-registered and does not use the cash accounting scheme.

At a control visit an officer disallows Mr King's reclaim of the VAT charged on Mr King's purchase of the combine harvester.

However, Mr King's tax adviser informs the VAT officer that:

(1)the combine harvester was supplied to Mr King; and

(2)it is irrelevant that another person (the trustees) paid for it.

The assessment to disallow the input tax claim is withdrawn."

Although the example is not 100% clear, it looks as if in this case the business (Mr King, equivalent to your limited company) contracted to buy the asset, but the trustees (equivalent to you) paid for it. I am by no means a VAT expert, and I would recommend you seek professional advice before entering into any contract. That advice can explain precisely what you need to do.

Grumpy_chap

The OP also needs to check the amount of VAT that can be reclaimed if there is any personal use of the van.

Is the OP registering for VAT in any case, based on turnover forecast or B2B transactions, or is it just because of the possibility to reclaim VAT on the van?