UK & Ireland Commercial and VAT reclaim

[DaveB]

For me it was either a IG or another pickup, so opted for the IG as something a bit more unusual etc, assuming as a company car, the business can reclaim the VAT. As all literature on the internet says its classed as a commercial (just FYI - I've ordered a 5 Seat Utility Wagon), I am going to argue the case and hope for the best.

Just to confirm, your accountant believes it is not a commercial, but Ineos still states it is?

I am in Australia so think this whole UK tax/commercial system is ridiculous
some things I do know is you don't go to a car company for tax advice.
You also don't go to a bank for investment advice or a realestate agent for property advice

 

[frankkk]

Here is something else I've found

Land Rover Defender Station Wagons​

HMRC has always considered these vehicles to be cars for tax purposes for the reasons given above, i.e. that

• they are mechanically propelled road vehicles, and
• none of the exceptions in s115(1) (EIM23100) apply to prevent them being cars.

James, there is a lot of mix-up here. HMRC looks at all cars (and all other vehicles) for tax purposes. Be it import duty, road tax, VAT, BIK and a few others, hidden taxes.

Tax is not just tax and even a Def station could be registered in the UK as a utility vehicle, like a mobile shop or workshop amongst others...all with tax and until recently even MOT implications (little known exemptions, maybe still in existence).

The original question was about VAT, apparently mixed up with BIK. HMRC is always after your money, regardless of what the scheme is called. Problem is, there is a lot of misinformation, even amongst accountants and other "professionals", and HMRC is not forthcoming with information on how to use the system for your own benefit.

 

[jamesfielding]

James, there is a lot of mix-up here. HMRC looks at all cars (and all other vehicles) for tax purposes. Be it import duty, road tax, VAT, BIK and a few others, hidden taxes.

Tax is not just tax and even a Def station could be registered in the UK as a utility vehicle, like a mobile shop or workshop amongst others...all with tax and until recently even MOT implications (little known exemptions, maybe still in existence).

The original question was about VAT, apparently mixed up with BIK. HMRC is always after your money, regardless of what the scheme is called. Problem is, there is a lot of misinformation, even amongst accountants and other "professionals", and HMRC is not forthcoming with information on how to use the system for your own benefit.

Hi Frankkk,
You’re absolutely correct, there is such a grey area regarding vehicles and HMRC trying to get your money either way.
Like I said previously, I will just keep assuming it’s a commercial vehicle until I am explicitly told otherwise.
As Tom said: DVLA classify it as commercial, so following the Vehicle Authority on this one. (And accountants advice).

 

[DaveB]

James, there is a lot of mix-up here. HMRC looks at all cars (and all other vehicles) for tax purposes. Be it import duty, road tax, VAT, BIK and a few others, hidden taxes.

Tax is not just tax and even a Def station could be registered in the UK as a utility vehicle, like a mobile shop or workshop amongst others...all with tax and until recently even MOT implications (little known exemptions, maybe still in existence).

The original question was about VAT, apparently mixed up with BIK. HMRC is always after your money, regardless of what the scheme is called. Problem is, there is a lot of misinformation, even amongst accountants and other "professionals", and HMRC is not forthcoming with information on how to use the system for your own benefit.

Does HMRC stand for His Majesty Richard C(k)imbal, or Or Happy Madison Recording Company

 

[frankkk]

Hi Frankkk,
You’re absolutely correct, there is such a grey area regarding vehicles and HMRC trying to get your money either way.
Like I said previously, I will just keep assuming it’s a commercial vehicle until I am explicitly told otherwise.
As Tom said: DVLA classify it as commercial, so following the Vehicle Authority on this one. (And accountants advice).

Absolutely..100% commercial.

Does HMRC stand for His Majesty Richard C(k)imbal, or Or Happy Madison Recording Company

You almost got it. It´s His Majesty Recording Company, London NW8 9AY

Concerned parties and individuals from the UK could actually drop the Recording Company a line to enquire about the tax regime for the Grenadier...

 

[JOB]

Concerned parties and individuals from the UK could actually drop them a line to enquire about the tax regime for the Grenadier...

And by the time the Grenadier is retiring from service in roughly 25 years time, you might receive a reply.

 

[LaurasOtherHalf]

I admire some of the head burying in this thread!

I have received advice from two accountants that if you're not going for the pool car exemption on any investigation by HMRC you risk them clawing back the VAT claimed back and back dated BIK, resulting in thousands of pounds.

If you do go for the pool car exemption, you will again face the wrath of the inspectors should you not have detailed mileage logs and receipts to prove it has indeed been used as claimed. Remember, the onus is on YOU to provide the evidence of use, not HMRC to prove otherwise. A "I've lost my homework" excuse won't wash.

Should you claim pool car and only have mileage logs and receipts for a company director using the vehicle, HMRC will take the view it's being used as a company car and claw back BIK and VAT.

 

[Eric]

And by the time the Grenadier is retiring from service in roughly 25 years time, you might receive a reply.

Na... they won't do a rush job just for you,

 

[jamesfielding]

So as a sole trader/limited company with 1 employee who had a 5 seater Utility Wagon - you wouldn’t be able to claim back VAT and may get charged BIK?

 

[Tom D]

To be fair the BIK rules apply to all vehicles, vans and cars, its just that the rate of BIK you pay is much higher for cars.

So anyone running any vehicle as a pool car is subject to the same rules, wether its a van, car, DCPU etc..

 

[chriscroft]

So as a sole trader/limited company with 1 employee who had a 5 seater Utility Wagon - you wouldn’t be able to claim back VAT and may get charged BIK?

As I understand it

Because it is an N1 commercial vehicle, you could argue that the vehicle is only used for business use, with zero BIK use and that would be OK, and generally parked at the business premise overnight; unless you are on "call-out" duties. You don't need to go down the pool-car route

If it was an M1 car (Belstaff), you would have to go down the pool-car route and that would be OK, to argue a pool car you would need multiple business drivers, and again park at the business premise overnight with zero BIK use.

But you would need full records with no holes to argue either situation successfully.

 

[jamesfielding]

As I understand it

Because it is an N1 commercial vehicle, you could argue that the vehicle is only used for business use, with zero BIK use and that would be OK, and generally parked at the business premise overnight; unless you are on "call-out" duties. You don't need to go down the pool-car route

If it was an M1 car (Belstaff), you would have to go down the pool-car route and that would be OK, to argue a pool car you would need multiple business drivers, and again park at the business premise overnight with zero BIK use.

But you would need full records with no holes to argue either situation successfully.

That’s what this will be for my business.
Used for day-to-day site work, site visits, client meetings and display purposes (it will be sign written). Parked at business address with occasional call-outs out of hours.

 

[Jeremy996]

We do not have "joined-up government" in the UK, so there is little link between HMRC, (His Majesty's Revenue and Customs), and the DVLA, (Driver & Vehicle Licensing Agency), so whatever ones says about a vehicle cannot be taken as gospel, so far as the other is concerned. Unless you have deep pockets and infinate patience, you do not want to go toe-to-toe with HMRC, as they employ full time counsel and you cannot treat as a commercial expense fighting HMRC and even winning.

The Grenadier is too heavy to count as a "dual-purpose" vehicle, so by default it fails the VAT and BIK rules. Ineos can ask HMRC to add one or more models to the approved list, (and get the VAT reclaim and van classification on the nod), but have not yet done so. I can see this leading to reduced UK sales for some time.

 

[LaurasOtherHalf]

So as a sole trader/limited company with 1 employee who had a 5 seater Utility Wagon - you wouldn’t be able to claim back VAT and may get charged BIK?

You can ask your accountant to do anything you want, he may advise differently but it's your company accounts. What I have been told is exactly as above. The company I own would absolutely use the Grenadier as intended, off road and carrying materials. I can argue it's sole commercial use easily.

Even so, HMRC would still likely argue the vehicle is a car and I would be taxed accordingly so upon investigation if I were unable to prove otherwise (which is plain as day at present-I could not) I would have to pay the VAT back that I'd reclaimed and I would personally be liable for the increased BIK (many thousands of pounds) I hadn't paid plus any uplift in corporation tax owed due to increased profits.

There may be fines involved as well.

As to proving one thing or another, the "grey area" isn't a grey area at all. There is a list of cars/vans/utility vehicles that HMRC has commented on, it's even on the gov. website for all to see.

The Grenadier is not on it.

It is obviously not on it because no one (such as the manufacturer) has approached HMRC for clarity. Now, that's not to say it won't appear on it in the future but until it is, we only have the established framework with which to work with (the much discussed 1000kg payload that trumps all else including passenger/load equations).

The 5 seat Utility Station Wagon currently cannot meet the established framework to be classified with HMRC as a commercial vehicle or van. While it currently doesn't, it depends on your own risk assessment. Do you fancy taking on HMRC?

Personally, knowing the above information I don't, mainly because I don't think I would win. I also think should anyone (Ineos or otherwise) approach HMRC fro clarification they will be told it doesn't match the current criteria and should be classed as a car for tax purposes.

 

[LaurasOtherHalf]

That’s what this will be for my business.
Used for day-to-day site work, site visits, client meetings and display purposes (it will be sign written). Parked at business address with occasional call-outs out of hours.

Apologies for my posts formatting-I'm new to the site!

If you have been advised that this will be OK to run as a commercial vehicle, claim the VAT on purchase back and reduce or not pay BIK you have been incorrectly advised. Business use, sign writing and location of address matter not a jot.

It's a car and needs to be taxed as such.

If your case was true, every company director in the land would have sign written Range Rovers "parked" at their business addresses.

 

[Tom D]

One alternative option is to buy the vehicle personally and then charge your business mileage. When compared to BIK costs this will be cheaper over the medium term and way cheaper over the long term.

So option 1: call it a pool car and risk getting wrists slapped and having to pay extra tax and fines..

option 2: pay the BIK. Which will be about £4,500pa for a basic rate taxpayer and about £9,000pa for a higher rate payer.

option 3:buy the car yourself, pay £10k in vat then charge your business milage. This is £0.45 for the first 10,000 miles and £0.25 for the rest. So if you did 20,000 miles you’d be getting back £7,000pa. You’d have used at least £6,000 worth of diesel at todays prices.. then theres your other running costs.

All these options suck.

But then if you were to take a southern European attitude towards paying tax which method would be the easiest to fiddle?

Option 1 is by far the cheapest, your business will take on all running costs, but if HMRC disagree you’ll pay back vat reclaim and backdated BIK which could run to £30k if you’re in year 2 by then..

Option 2 is what it is. You’ll have peace of mind you’ve done nothing wrong.

Option 3 is the easiest to manipulate depending on the structure of your business. You could claim the milage and the business could also be paying the fuel, if you run several vehicles how will they know? The business could also pick up other associated costs..

I’m not sure how other businesses operate but lets be honest there are lots of tradies using DCPU’s and vans for personal use, how are they doing it? Who knows? Its a bit of a mess to be honest. We have 7 vehicles all being used as pool vehicles, we have never had any issues and if we were inspected i think we’d be fine, my accountant does too. But all of our other vehicles are vans / dual purpose, the grenadier will be the first one thats a ‘car’ as far as HMRC are concerned. Which is a nonsense as my last truck was a 5 seat defender and to all extent the same as the Grenadier, just a bit lighter…

There are also rules where if you did use the pool car for personal use you can pay the BIK for that small period… it seems a little woolly but it would appear that if you needed to use the pool car for personal use, say for example that you wanted to go on holiday in your Grenadier which was being used as a pool car. It would work as follows: You take the full BIK amount for the year, say £25k, then you apply a “fair and reasonable” figure to that based on your private usage. You could do this by the milage or perhaps by the number of days used. So if the vehicle had done 25,000 miles in the year and 1,000 of those were private you’d pay 1/25th of the BIK ie £1,000 x your tax rate so £200 for a basic rate payer…. I believe that there may be national insurance complications too..

 

[LaurasOtherHalf]

I’m not sure how other businesses operate but lets be honest there are lots of tradies using DCPU’s and vans for personal use, how are they doing it? Who knows? Its a bit of a mess to be honest. We have 7 vehicles all being used as pool vehicles, we have never had any issues and if we were inspected i think we’d be fine, my accountant does too. But all of our other vehicles are vans / dual purpose, the grenadier will be the first one thats a ‘car’ as far as HMRC are concerned. Which is a nonsense as my last truck was a 5 seat defender and to all extent the same as the Grenadier, just a bit lighter…

There are also rules where if you did use the pool car for personal use you can pay the BIK for that small period… it seems a little woolly but it would appear that if you needed to use the pool car for personal use, say for example that you wanted to go on holiday in your Grenadier which was being used as a pool car. It would work as follows: You take the full BIK amount for the year, say £25k, then you apply a “fair and reasonable” figure to that based on your private usage. You could do this by the milage or perhaps by the number of days used. So if the vehicle had done 25,000 miles in the year and 1,000 of those were private you’d pay 1/25th of the BIK ie £1,000 x your tax rate so £200 for a basic rate payer…. I believe that there may be national insurance complications too..

I'll trim to the pertinent parts. Your comparison to "tradies" using their vans for personal use is clear-they are DCPUs or vans! Not a car like the Grenadier!

Fuel cards incur BIK if the fuel is used for private use.

Pool cars for business use (and fuel cards etc) will require diligent use of mileage logs and receipts to prove you are not receiving a "benefit".

The main thing I'd ask anyone attempting to run a Grenadier as a business use commercial vehicle is this;
In the eyes of HMRC (not the DVLA) the Grenadier is absolutely no different to a Range Rover Sport, no matter what you use it for (towing diggers, going across fields to feed the lambs or giving out to staff to attend an out of hours call out), what it's VED tax status is or whether it is sign written or has glass rear windows.

How do you think the tax man would react to you putting a Range Rover Sport through the books? I rest my case

I also repeat, it is not the tax man's responsibility to prove you wrong, it is YOUR responsibility to prove you right. The rules as they currently are in place are going to see you fail in all but some vanishingly small circumstances.

 

[chriscroft]

I'll trim to the pertinent parts. Your comparison to "tradies" using their vans for personal use is clear-they are DCPUs or vans! Not a car like the Grenadier!

Fuel cards incur BIK if the fuel is used for private use.

Pool cars for business use (and fuel cards etc) will require diligent use of mileage logs and receipts to prove you are not receiving a "benefit".

The main thing I'd ask anyone attempting to run a Grenadier as a business use commercial vehicle is this;
In the eyes of HMRC (not the DVLA) the Grenadier is absolutely no different to a Range Rover Sport, no matter what you use it for (towing diggers, going across fields to feed the lambs or giving out to staff to attend an out of hours call out), what it's VED tax status is or whether it is sign written or has glass rear windows.

How do you think the tax man would react to you putting a Range Rover Sport through the books? I rest my case

I also repeat, it is not the tax man's responsibility to prove you wrong, it is YOUR responsibility to prove you right. The rules as they currently are in place are going to see you fail in all but some vanishingly small circumstances.

There is no N1 Commercial Ranger Rover Sport; The system (DVSA) has not and would not give the RRS an N1 Individual Vehicle Approval;
I would think that Ineos jumped through a lot of hoops to get the Stations Wagons N1 Approval, it does mean something (That greater design consideration has been given to cargo goods than to passengers), it's not just a random rating.
If Landrover could get an N1 Approval for a RRS I think it would try like hell.
The M1 grenadier and N1 grenadier are not the same vehicle

 

[LaurasOtherHalf]

There is no N1 Commercial Ranger Rover Sport; The system (DVSA) has not and would not give the RRS an N1 Individual Vehicle Approval;
I would think that Ineos jumped through a lot of hoops to get the Stations Wagons N1 Approval, it does mean something (That greater design consideration has been given to cargo goods than to passengers), it's not just a random rating.
If Landrover could get an N1 Approval for a RRS I think it would try like hell.
The M1 grenadier and N1 grenadier are not the same vehicle

In the case of accounting for company vehicle tax, you couldn't be more wrong. The vehicles N1 class counts for absolutely nowt.

In the case for VED or "road tax", yes it does. More to the point for Ineos, in the case of how many "vehicles" it can sell with regards to emissions regulations it very much does.

Were it not for the N1 commercial Stationwagon, Ineos would have been pegged back at a maximum of 1700 cars registered per annum in the UK. Now though, it can legally sell 1700 cars and 4300 "commercial vehicles".

In the EU, Ineos can legally sell 10,000 cars and a further 22,000 "commercial vehicles".

This is the real reason there is a commercial version of the Grenadier. It's simply a way of getting around the emissions regulations which prohibit such inefficient cars. That many of us mistook this to mean the car would be classed as a commercial vehicle with HMRC is by the by. There's nothing wrong in getting it wrong as long as you realise your mistake. I made the mistake so I cancelled my order PDQ.

I repeat, none of this is of any interest to the tax man should you attempt to run any form of Ineos Grenadier (yes, including the two seater) through the books of a UK limited company as a commercial vehicle for the sole use of the employee, business use or private.

It's disingenuous to keep repeating this N1 class nonsense as some form of defence against incorrect accounting. People who believe it risk being thousands of pounds out of pocket as well as incurring the wrath of HMRC.

 

[LaurasOtherHalf]

Also by the by, I hope I'm not coming across inherently negative on the car (for it is a car in the eyes of HMRC at least!). I absolutely love the thing! So much so that I am even considering buying one privately (outside of my company) and simply still using it as my work vehicle and charging the company mileage.

It does grate however that my business will use the thing and yet the costs come out of my own pocket.

There's a lot to knock Sir Jim for (and god the brexit thing is tedious in the extreme) but Ineos' balls up of the commercial status for business users is a serious oversight. Had it have met the rules, or had they got HMRC to accept it on the list of approved commercials I don't doubt they would be able to sell every every single one for years to come.

I called in yesterday to show the family the prototype at our local dealer, the salesman admitted just that morning they had another cancellation for exactly the same reason.

If nothing else, at least all these canceled business orders will mean cars get into the hands of private individuals willing to put their money where their moth is even quicker. For those who do, I'm extremely jealous-it's a beautiful bit of kit.