Reclaiming VAT on a credit purchase made by company director?

MaryJaneParker

Hello!
I am pretty confused on how to proceed with a company purchase. The company is in need of a mobile phone. I am the director of the company and will be buying the phone on behalf of the company and paying for it via installments (over 12 months with 0% APR). The company can not apply for this credit which is why I would rather incur this expense as a director and have the company pay me back. The phone will immediately be owned by the company, I am not selling it to the company I am just incurring the expense effectively as a directors loan. 
1) Can the company owe me the full amount upfront? I have read that when it comes to credit this is the case, you would not charge each monthly installment but rather the whole cost. 
2) When it comes to reclaiming VAT, is it for the full amount even though it is being paid via installments? 
Thank you for clarifying, I don't have much experience using credit cards or installment plans in this way, so any advice is very helpful!

Jeremy535897

It is clear from what you say that you as director are contracting with the mobile phone company. Unless you personally are registered for VAT, you cannot recover it. The company cannot recover it either, as it will not be able to show HMRC an invoice from the phone company addressed to it.

If you transfer ownership to the company, then the company owes you the full price at that point. How you choose to pay for it is your own affair.

Grumpy_chap

If the OP's Ltd Co cannot take a mobile phone contract in the company's own right, is this a very new company?
Obviously, the OP's Ltd Co must be VAT-registered before any VAT can be reclaimed irrespective of anything else.  Sometimes, very new companies will not register to VAT straight away and, when they do so, may opt for flat-rate scheme which also avoids reclaiming VAT in the traditional sense.

MaryJaneParker

Sorry if there was some misunderstanding, it is not a mobile phone contract. It is buying a phone directly from Samsung using payment installments from Klarna. The part that my company can not do is the get a payment plan from Klarna as I am not able to get the credit approved. 
I have often made payments on behalf of the company on places like Amazon etc when the company has not had enough in the account to cover the purchase. The cost then goes directly into the Directors Account, and is later paid back to me when the company has enough. It is completely fine to reclaim VAT on these purchases, it is a cost made for the company with money loaned by me. I have checked this with accountants.
I am just unsure since this is a slightly different payment arrangement if it would work in the same way.

Thank you for the feedback so far! I appreciate it!

Grumpy_chap

MaryJaneParker said:

buying a phone directly from Samsung using payment installments from Klarna. 
I have often made payments on behalf of the company on places like Amazon etc when the company has not had enough in the account to cover the purchase. The cost then goes directly into the Directors Account, and is later paid back to me when the company has enough. It is completely fine to reclaim VAT on these purchases, it is a cost made for the company with money loaned by me. I have checked this with accountants.

I think this works exactly the same.  
You buy the phone from Samsung for £1k + VAT = £1.2k
You process that capital purchase at £1.2k into the company as per the usual Director's Loan approach and claim the VAT
The company pays you back the £1.2k
How you financed the £1.2k is irrelevant

I will now be very boring, but very MSE.  I previously had high-spec Samsung phones until I realised that I can get exactly the same level of performance for far less money.  My current phone is a Motorola; it is fantastic and only costs the same as one of the monthly interest free instalments on the latest Samsung.

MaryJaneParker

Grumpy_chap said:

I think this works exactly the same.  
You buy the phone from Samsung for £1k + VAT = £1.2k
You process that capital purchase at £1.2k into the company as per the usual Director's Loan approach and claim the VAT
The company pays you back the £1.2k
How you financed the £1.2k is irrelevant

I will now be very boring, but very MSE.  I previously had high-spec Samsung phones until I realised that I can get exactly the same level of performance for far less money.  My current phone is a Motorola; it is fantastic and only costs the same as one of the monthly interest free instalments on the latest Samsung.

Thank you so much for the answer! That was what I had assumed, but it's reassuring to hear someone agree. 
Ah I know with Samsung you often are paying for the brand name, but in this case I am an app developer so we like to have a good range of devices from multiple brands to test and build on and they do have very powerful devices after all, especially when it comes to gaming. But appreciate the heads up!

Jeremy535897

The attached link explains where you can deviate from the requirement to have an invoice in the name of the company rather than its employee:
https://www.haescooper.com/reclaiming-vat-on-employees-expenses/

It certainly won't apply to a phone over £250. The reference to gaming is also unhelpful, unless that is the company's business.

unholyangel

Grumpy_chap said:

MaryJaneParker said:

buying a phone directly from Samsung using payment installments from Klarna. 
I have often made payments on behalf of the company on places like Amazon etc when the company has not had enough in the account to cover the purchase. The cost then goes directly into the Directors Account, and is later paid back to me when the company has enough. It is completely fine to reclaim VAT on these purchases, it is a cost made for the company with money loaned by me. I have checked this with accountants.

I think this works exactly the same.  
You buy the phone from Samsung for £1k + VAT = £1.2k
You process that capital purchase at £1.2k into the company as per the usual Director's Loan approach and claim the VAT
The company pays you back the £1.2k
How you financed the £1.2k is irrelevant

I will now be very boring, but very MSE.  I previously had high-spec Samsung phones until I realised that I can get exactly the same level of performance for far less money.  My current phone is a Motorola; it is fantastic and only costs the same as one of the monthly interest free instalments on the latest Samsung.

The company can pay OP 1200 but can't claim the £200 VAT back, because there was no VATable supply to them since the OP isn't VAT registered.


If the OP does this, there is also the issue of "piercing the veil". Limited companies have liability limited because they're completely separate from OP. If OP starts blurring the line between personal and business, there is a possibility a court would also and OP could end up personally liable for any company debts.

Grumpy_chap

Thanks @unholyangel - that is an important note as I do exactly what I described and my Accountant has always been happy with it.  He likened it to an employee claiming expenses and having to provide the cash sale receipt, which then allows the employer to recover input VAT.  Cash sale receipts often don't declare the purchaser.

Your stance is different to my Accountant's stance and I am interested to understand why and the risks.  The way my Accountant has interpreted this seems the same as how the OP's Accountant interpreted it also:

MaryJaneParker said:

I have often made payments on behalf of the company on places like Amazon etc when the company has not had enough in the account to cover the purchase. The cost then goes directly into the Directors Account, and is later paid back to me when the company has enough. It is completely fine to reclaim VAT on these purchases, it is a cost made for the company with money loaned by me. I have checked this with accountants.

In my case, I simply use credit card as a matter of convenience.  Except mileage claims, which don't have an accompanying VAT-receipt, but the legislation permit an element of input VAT to be claimed.

Jeremy535897

If you look at the link I provided it sets out where VAT can be claimed on expenses incurred by employees.

Grumpy_chap

Thank you Jeremy, that is a very useful link - I shall bookmark it.  I am always under the £250, so that seems key.

What is the situation if the business buys an item over £250 on a retail basis, so there is a receipt stating the supplier, goods supplied and VAT, but not the purchaser?  Say, it is simply a till receipt, or says "cash sales"?