Vehicle Leasing and VAT

[KennyO]

Looking into leasing as an option for a family car. Have read about leasing through the business (partnership) and claiming back half the VAT and the lease cost being allowable against tax.

Can this be done with a vehicle that will only do a small percentage of 'business use'? Will also be driven lots by someone who is not a partner.

What are the pitfalls of leasing- some of the deals look very attractive.

Should also say that I already have my truck (purchased outright) which does most of the business related work.

Any advice greatly appreciated.

 

[Beowulf]

Looking into leasing as an option for a family car. Have read about leasing through the business (partnership) and claiming back half the VAT and the lease cost being allowable against tax.

Can this be done with a vehicle that will only do a small percentage of 'business use'? Will also be driven lots by someone who is not a partner.

What are the pitfalls of leasing- some of the deals look very attractive.

Should also say that I already have my truck (purchased outright) which does most of the business related work.

Any advice greatly appreciated.

I'm no tax lawyer, but I do engage in their services quite a bit. I asked a similar question a few years ago, and the answer went something like this ...

"It appears to me, Mr Beowulf, that you are trying to evade the tax due by artificially claiming an element of business use upon a vehicle, when in reality there are already one or more vehicles for sole business use at the disposal of yourself or other employees.

Now, if it appears that way to me, then Her Majesty's Revenue and Customs are also likely to have a keen interest in the matter and which may lead to such investigations or audits producing unintended consequences in other areas.

Is it really worth saving a few shillings given the risk? Hmmm? My fees for defending such an action would be many times the savings you may make, win or lose."

Ok, it was a bit more legalese than that, but I could read between the lines.

 

[Cowabunga]

I'm no tax lawyer, but I do engage in their services quite a bit. I asked a similar question a few years ago, and the answer went something like this ...

"It appears to me, Mr Beowulf, that you are trying to evade the tax due by artificially claiming an element of business use upon a vehicle, when in reality there are already one or more vehicles for sole business use at the disposal of yourself or other employees.

Now, if it appears that way to me, then Her Majesty's Revenue and Customs are also likely to have a keen interest in the matter and which may lead to such investigations or audits producing unintended consequences in other areas.

Is it really worth saving a few shillings given the risk? Hmmm? My fees for defending such an action would be many times the savings you may make, win or lose."

Ok, it was a bit more legalese than that, but I could read between the lines.

You should get a better accountant. If there are several potential business drivers, then there is potential for several business and dual purpose vehicles. You can insure for a tax inspection's extra accountancy cost at quite reasonable rate and the inspection will be made regardless of that single minor issue.

 

[Beowulf]

You should get a better accountant. If there are several potential business drivers, then there is potential for several business and dual purpose vehicles. You can insure for a tax inspection's extra accountancy cost at quite reasonable rate and the inspection will be made regardless of that single minor issue.

That would then be a pool car, and any personal use would have to be incidental to the primary purpose as a business vehicle.

Incidentally I would never ask an accountant for tax advice, accountants are experts in matters of accounting. Tax is a legal matter, best dealt with by lawyers. My accountants and tax lawyers are all from an international firm, I doubt the quality of their advice is really in question - certainly in comparison to any other firm of professional advisors.

As for insuring against professional fees, waste of time. The penalties would dwarf any fees, and those cannot be insured for.

 

[Cowabunga]

That would then be a pool car, and any personal use would have to be incidental to the primary purpose as a business vehicle.

Incidentally I would never ask an accountant for tax advice, accountants are experts in matters of accounting. Tax is a legal matter, best dealt with by lawyers. My accountants and tax lawyers are all from an international firm, I doubt the quality of their advice is really in question - certainly in comparison to any other firm of professional advisors.

As for insuring against professional fees, waste of time. The penalties would dwarf any fees, and those cannot be insured for.

You are talking about large companies. Most farms are small businesses by any definition and do not generally find your scenarios relevant.
As for insurance, you assume, possibly wrongly, that issues will be found during an inspection that will incur penalties [even though both an international accountancy and legal firm will have been doing your business]. That apart, the accountancy fee for going through a full inspection will not be insubstantial, especially I suspect if you use some international accountancy and legal firm, so it still may be worth insuring against.

 

[2CE]

Looking into leasing as an option for a family car. Have read about leasing through the business (partnership) and claiming back half the VAT and the lease cost being allowable against tax.

Can this be done with a vehicle that will only do a small percentage of 'business use'? Will also be driven lots by someone who is not a partner.

What are the pitfalls of leasing- some of the deals look very attractive.

Should also say that I already have my truck (purchased outright) which does most of the business related work.

Any advice greatly appreciated.

We used to do this and pay the VAT fuel scale charge but for the milage we were doing it ended up being better to lease the car privately and charge the milage to the company. You can claim up to 45p/mile before the income becomes taxable.

Leasing deals often look attractive but most are advertised on ridiculously low annual milage. The numbers look a lot less attractive when you get a quote for more than 10k miles per year.

It's still a good way of having a new vehicle without needing a loan or tying up capital in a rapidly depreciating asset, although the main reason I like it is because servicing /fixing the vehicle if something goes wrong is someone else's problem.