Can my own company buy a new van and sell it to me later without the VAT?

FrankFalcon

Hi all

I’m not looking to evade VAT here and I’m not looking for sarcastic or nasty comments implying I am trying to evade paying my fair share. I’m asking what I can morally/rightly/legally do in my quest to buy a van. After all, our politicians and TV stars always seem to find ways of ‘Saving money’ and I am no different. 

So, the story… I want to buy a van to have it converted into a camper van. The van is £30,000 + VAT. 

The conversion cost is £20,000 + VAT. 

I am a director of a VAT registered manufacturing company that makes plastic moulding components. The company can easily afford to buy the van. I am not attempting to evade the VAT because of course it will be paid to the dealership when the company buys the van. So, the company buys the van from the dealership and pays the VAT. Job done. VAT PAID. Subsequently, through the correct accounting procedures, the company later claims the VAT back on the van purchase. So, I’m Guessing here now that at this point VAT has now not been paid on the van (because the company claimed it back through their accounts). Am I correct???

So, now I PERSONALLY want to buy this van (the company has just purchased) from my company. The company has already paid VAT once (but reclaimed it) so I (the individual) don’t want to pay it. 

I intend to pay for the van conversion from my own pocket so there are no complications there. 

Is it possible I can do what I want here? If the company sells me the van (for the price of £30,000 with no VAT) is this an actual sale buy the company? Ie…Is the company selling me something, meaning I have to pay VAT on this item it is selling me (The van). 

I cannot have it converted to a camper van whilst it is owned by the company because the company fleet insurance won’t cover a camper van. Therefore the van needs to be in my name and insured by me personally for the conversion. 

Reading this back it may seem that I am trying to have my cake and Eat it. I’m not. I am just looking for advice on what’s best to do in this situation because the massive International firm my Sister works for sells employees their company cars after a few years massively cheaper than it would be to buy. Ie…Sister gets a brand new company car BMW on 1st Jan 2019. The cost in 2019 was £50,000 + VAT. She uses the car for 3 years on company business. Then at the end of the 3 years (before the company gives her a new company car), they offer the car for sale to her for a lot cheaper than the same car would be on a forecourt. She buys the car for her hubby. I hope this makes sense? 

Any suggestions on what I can do please? 

Grumpy_chap

Can my own company buy a new van and sell it to me later without the VAT?

No.

When the Ltd Co buys the van for £30 + VAT = £36k, that asset always has the VAT attached to it while owned by the business.

The van is then assigned to an individual and used.  The individual is subject to the appropriate rate of BIK.

After some number of years, the van is too old for the business so the van will be sold as a used van.  
It has to be sold at proper market value - even more important to demonstrate if selling to a linked individual.
Let's say the market value is £15k via Autotrader or similar.
That is actually £15k including VAT, so the invoice would show £12.5k + VAT = £15k
Obviously, the "true market value" has to be correct and van prices on sites such as Autotrader are often shown as "+VAT", so if the van is £15k + VAT, that would be £18k payable by the individual.

Different VAT rules for a motor-trader, but they are not relevant for this case.

In the case of the sister buying her BMW cheaper than forecourt, that is probably simply the difference between trade sale and retail sale.  The employing company have a duty to their stakeholders to realise proper value for the vehicles.  If vehicles are sold at substantially below proper value, that may also give rise to a tax liability.  Sale at trade price is perfectly reasonable as the employing business is not in the business of preparing cars for sale.

justwhat

So you want to personally buy the van for 30k ...Don't think the VAT man would like that..

Also you say you are paying for conversion yourself , What about the VAT on that? 

And lastly, why not just ask your accountant?, He should be aware of what you can and can't do 

Your sisters car purchase may possibly still have VAT on. Would think it will come under depreciation rules.

Jeremy535897

If the company buys an asset that is not for its business, it cannot claim the VAT. The purchase would be for the business if the van is then provided to you as a benefit, as that means the van is effectively a cost of employment to the company. When the company transfers the van to you, it charges you VAT based on the van's market value at that time.

There is no recoverable VAT on a car that will have any private usage, so VAT is not in point with regard to your sister's car. As to the price charged, cars tend to depreciate quickly in the first couple of years, unlike vans. You may also find that the arrangements actually involve an independent car leasing company.

prowla

To clarify, the idea is:

1. The company will buy the van and pay VAT.
2. The company will then reclaim the VAT paid.
3. The company will then customise the van to the personal spec of the director and pay for that, including VAT.
4. The company will then claim the VAT paid.
5. The company will then sell the van to a director, VAT-free.

I don't see how that could be viewed as anything other than misuse of company funds plus a tax avoidance scheme; it would be almost impossible to pass that off as a legitimate business expenditure.

Sandtree

When your company sells the vehicle it will have to add VAT because its a VAT registered company.

The bit that is missing is how much your company charges you to buy it from them... as you say your sister is able to buy her ex-company car for what you think is less than forecourt price (though they wont be getting a forecourt car so that makes sense). There would however be serious questions asked on the corporate governance if the company buys it for £30k and immediately then sells it for £25k (both plus VAT)

As stated by others, this is all sounding like tax evasion and the minimum if HMRC catch you because you sell it for below market value to yourself is you pay the taxes on the difference but you could easily get penalties added on top and other issues for not discharging your duties as a director correctly.

For non-VAT exempt items VAT simply has to be paid in the process. There is no legal way to avoid it if you want ownership of the item.

FrankFalcon

Hi guys

Thanks for your advice.  I know it may have seemed to be a question that answered itself but there's no harm done in asking those who know and who are in the business.  BTW...We are changing accountants next year because everything we ask ends with more questions than answers and he himself is retiring in 3 years.  Yes, I could have queried this with HMRC but has anybody recently tried to get through to HMRC on the phone.  It was quicker doing it here in this forum.  I have a definited answer to the question I asked and am also enlightened on why my Sister can buy her car in this way.  
Cheers all.
Hope you all have a great weekend.

Pennywise

re your sisters company car, her employer would almost certainly have paid less than the £50k list price as they can usually get "fleet" deals which are a lot cheaper.  VAT is irrelevant as VAT can't be reclaimed on a new car and there's no VAT on selling a car (unless your business is car sales).  The employer would sell it at "trade" price to her at the end of 3 years as that's what they'd get if they sold it to someone else - again, that's a big difference compared with forecourt pricing.

unholyangel

FrankFalcon said:

Hi guys

Thanks for your advice.  I know it may have seemed to be a question that answered itself but there's no harm done in asking those who know and who are in the business.  BTW...We are changing accountants next year because everything we ask ends with more questions than answers and he himself is retiring in 3 years.  Yes, I could have queried this with HMRC but has anybody recently tried to get through to HMRC on the phone.  It was quicker doing it here in this forum.  I have a definited answer to the question I asked and am also enlightened on why my Sister can buy her car in this way.  
Cheers all.
Hope you all have a great weekend.

That indicates they know their stuff, or at least enough to know the answer is normally always "it depends". There is rarely ever a simple yes or no answer to an accounting question. That goes tenfold if tax is involved. 

Tax law can sometimes be like:
If A then 2, except on a Tuesday, unless you're wearing blue, or facing east on the stroke of midnight last month at any time, or your name is Karen and you were born on a Monday.  

Then you'll have to work out whether "on the stroke of midnight" means you have to be facing east as it starts to strike or at any point during 0000hrs. 

And yes, my example is ridiculous. Because tax law can sometimes seem that ridiculous.