self employed pcp car

BigGirlPants

WellKnownSid said:

MyRealNameToo said:

WellKnownSid said:

I would agree - pence per mile or business takes on the lease (claims 50% VAT IIRC) and provides the car as a P11D perk at low BIK if electric.

They are self employed and are using cash accounting so P11d is irrelevant as they arent an employee and they personally are the business

Indeed, and people start off self-employed then expand / take on more work / staff / etc.  This can be one of several financial decisions which point towards the benefit of taking on an accountant, possibly forming a limited company, as part of better tax planning or developing an exit strategy.

I agree and all that is good advice. He is not at that stage at the moment, he's just trying to find some advice on whether he can claim back a proportion of his pcp payments.

BigGirlPants

For anybody reading this in the future, I think I have the answer although of course do your own research, just incase I have been wrongly advised, or things might have changed.

The PCP contract is treated by hmrc as a lease, and therefore 75%,  (the business proportion), of the lease is tax deductible, plus 75% ongoing costs such as servicing etc.
That needs to be accurate records kept of the mileage to show the business and private proportions.


When its time for the balloon payment, that is a capital allowance and therefore 75% of the 18% write down allowance annually is tax deductible, (its an ev, so 0% emissions), plus again the same proportion of ongoing costs.

As under the vat threshold for registering, the actual amount paid is what is used.
 There is no VAT to claim back etc.


I hope this is helpful to somebody and I believe is the correct information as I have been advised.

MyRealNameToo

BigGirlPants said:

For anybody reading this in the future, I think I have the answer although of course do your own research, just incase I have been wrongly advised, or things might have changed.

The PCP contract is treated by hmrc as a lease, and therefore 75%,  (the business proportion), of the lease is tax deductible, plus 75% ongoing costs such as servicing etc.
That needs to be accurate records kept of the mileage to show the business and private proportions.


When its time for the balloon payment, that is a capital allowance and therefore 75% of the 18% write down allowance annually is tax deductible, (its an ev, so 0% emissions), plus again the same proportion of ongoing costs.

As under the vat threshold for registering, the actual amount paid is what is used.
 There is no VAT to claim back etc.


I hope this is helpful to somebody and I believe is the correct information as I have been advised.

HMRC used to treat all PCP as a purchase when it comes to consideration for VAT, they then had a big court case with Mercedes who was treating it as a lease for VAT purposes and at the same time a similar case was being taken in the EU against Mercedes and some of the other EU tax authorities.

Mercedes won the case and HMRC updated their rules and now the answer is... it depends. For VAT for the finance company it depends on how the balloon is set -v- the anticipated vehicle value, if its set such that the balloon is high so most will surrender the vehicle then they can apply leasing VAT treatment. If its set low so anyone sensible would buy the vehicle then its to be treated as a purchase VAT treatment. 


I'm no tax expert and can't tell you if the VAT department of HMRC considers things differently to the Income Tax part of HMRC or if the two have actually gotten together and come up with a consolidated approach. The fact you say there is no VAT to claim back though is peculiar given as a purchase or a lease VAT would be charged but in different ways. 

BigGirlPants

MyRealNameToo said:

BigGirlPants said:

For anybody reading this in the future, I think I have the answer although of course do your own research, just incase I have been wrongly advised, or things might have changed.

The PCP contract is treated by hmrc as a lease, and therefore 75%,  (the business proportion), of the lease is tax deductible, plus 75% ongoing costs such as servicing etc.
That needs to be accurate records kept of the mileage to show the business and private proportions.


When its time for the balloon payment, that is a capital allowance and therefore 75% of the 18% write down allowance annually is tax deductible, (its an ev, so 0% emissions), plus again the same proportion of ongoing costs.

As under the vat threshold for registering, the actual amount paid is what is used.
 There is no VAT to claim back etc.


I hope this is helpful to somebody and I believe is the correct information as I have been advised.

HMRC used to treat all PCP as a purchase when it comes to consideration for VAT, they then had a big court case with Mercedes who was treating it as a lease for VAT purposes and at the same time a similar case was being taken in the EU against Mercedes and some of the other EU tax authorities.

Mercedes won the case and HMRC updated their rules and now the answer is... it depends. For VAT for the finance company it depends on how the balloon is set -v- the anticipated vehicle value, if its set such that the balloon is high so most will surrender the vehicle then they can apply leasing VAT treatment. If its set low so anyone sensible would buy the vehicle then its to be treated as a purchase VAT treatment. 


I'm no tax expert and can't tell you if the VAT department of HMRC considers things differently to the Income Tax part of HMRC or if the two have actually gotten together and come up with a consolidated approach. The fact you say there is no VAT to claim back though is peculiar given as a purchase or a lease VAT would be charged but in different ways. 

Thank you for your input. I only mean there's no VAT to claim back because we, are not that registered as we are under the threshold.