UK & Ireland VAT. The ugly truth about the "Pool Car" usage case.

[Tom D]

So after a fair bit of discussion with my accountants things aren’t looking good.

Whilst ‘Pool Car’ status would be fine for HMRC re BIK tax it doesn’t wash with HM Customs and Excise. It is theoretically possible to claim the vat back on a pool car but the pool car rules are interpreted much more strictly by HMCE. According to my accountant HMCE would insist on the following: that it was written into the contract of the driver that it was not for personal use, that it was insured strictly for business use only. And that the car and the keys were kept at work. Even then they might still refuse a vat reclaim….


From my accountant re pool car status:
“The VAT definition is much stricter than the BIK definition. There are opportunities to deal with the private use through your director’s current account in order not to need to declare a benefit in kind, but from a VAT angle you would need to be able to show that there is a ‘physical and legal restriction’ on using the vehicle privately.

To satisfy the VAT criteria the insurance would have to be limited to business journeys, the vehicle and keys would need to be kept at the office and I would recommend also putting in place a board minute stipulating that private use is not allowed. There have been cases where, even if all of those items are in place, HMRC have still blocked the VAT reclaim. In your case you and your wife own the bulk of the share capital, as opposed to being answerable to unrelated shareholders with a larger stake in the company, so there would still be a risk that HMRC would block the claim.”

Not good news.
Considering my options now..

 

[Jeremy996]

That's the bad news. You have been given the background, so what is the practical reality?

HMRC is massively understaffed and they are not looking for a fight unless they can snag a lot of tax/VAT easily. So long as you do not flaunt any private use in their faces, you have a vehicle you regularly use for home to office journeys, there really is a marked space in the office key box for the keys and you have written a board minute to ban private use, (except in emergencies), you will probably be fine. The insurance is not something that can easily be policed, as the insurance company construct the insurance policy not the taxman, so pick a broker that automatically covers private use at no cost, (like NFU). They cannot use thumbscrews on you, so make sure your story is plausible and don't post 27,000 pictures of you and the Grenadier on holiday on Facebook!

If they block the VAT reclaim, they will have to act fairly quickly and the vehicle will probably be worth more than you paid for it, so sell it and buy something more spartan.

 

[Tom D]

You don’t mess with HMCE, they have way more power than HMRC. They can freeze your bank account for instance, HMRC can’t. Its a shitter but I think that I’ll either have to lease it, in which case I could use it privately and claim 50% of the vat or buy it personally. Or buy it through the business as planned but not claim the vat…
IG should have released a commercial version with a 3.8ton GVW then it would have a payload of a ton and you could claim the vat back no problem. You’d need an O licence but that wouldn’t be a big deal..

 

[Jeremy996]

You don’t mess with HMCE, they have way more power than HMRC. They can freeze your bank account for instance, HMRC can’t. Its a shitter but I think that I’ll either have to lease it, in which case I could use it privately and claim 50% of the vat or buy it personally. Or buy it through the business as planned but not claim the vat…
IG should have released a commercial version with a 3.8ton GVW then it would have a payload of a ton and you could claim the vat back no problem. You’d need an O licence but that wouldn’t be a big deal..

Ineos couldn't get the CO2 concession for a plated commercial vehicle in the higher weight class. It does mean that the chassis-cabs could be massively up-plated when they eventually arrive. It is a real pity they could not get it on the original weight target, as that would have allowed a 1 tonne payload and remain as a PLG vehicle.

 

[chriscroft]

So after a fair bit of discussion with my accountants things aren’t looking good.

Whilst ‘Pool Car’ status would be fine for HMRC re BIK tax it doesn’t wash with HM Customs and Excise. It is theoretically possible to claim the vat back on a pool car but the pool car rules are interpreted much more strictly by HMCE. According to my accountant HMCE would insist on the following: that it was written into the contract of the driver that it was not for personal use, that it was insured strictly for business use only. And that the car and the keys were kept at work. Even then they might still refuse a vat reclaim….


From my accountant re pool car status:
“The VAT definition is much stricter than the BIK definition. There are opportunities to deal with the private use through your director’s current account in order not to need to declare a benefit in kind, but from a VAT angle you would need to be able to show that there is a ‘physical and legal restriction’ on using the vehicle privately.

To satisfy the VAT criteria the insurance would have to be limited to business journeys, the vehicle and keys would need to be kept at the office and I would recommend also putting in place a board minute stipulating that private use is not allowed. There have been cases where, even if all of those items are in place, HMRC have still blocked the VAT reclaim. In your case you and your wife own the bulk of the share capital, as opposed to being answerable to unrelated shareholders with a larger stake in the company, so there would still be a risk that HMRC would block the claim.”

Not good news.
Considering my options now..

Hi Tom D;
Was this advice is for a Belstaff M1 car?
Not an N1 commercial?
Thanks in advance

 

[Jeremy996]

Hi Tom D;
Was this advice is for a Belstaff M1 car?
Not an N1 commercial?
Thanks in advance

It is for a 5 seat N1 Utility Station Wagon - (not like I'm stalking, but I've been tracking this issue rather closely).

 

[Tom D]

Yes n1. Doesn’t make any difference though. They’re both cars as far as the vat man is concerned.

 

[Tom D]

I don’t really blame INEOS for this problem. They would have to shave at least 200 kg off the car to get a 1 ton payload, or 650kg to get it into the dual purpose vehicle category. Either would probably compromise the build quality. And given that I’m hoping that this car will last a long time I’d rather they didn’t. It’s our crazy laws that are the problem.

 

[chriscroft]

Yes n1. Doesn’t make any difference though. They’re both cars as far as the vat man is concerned.

Hi Tom
Is your understanding the VAT treatment can be different between M1 & N1
M1 absolutely zero VAT reclaim unless it"s a pool car or you are a professional driving company etc
N1 you can pro-rata the VAT reclaim depending on how you structure the procurement, and you split between: business use/non-business use

 

[Tom D]

Hi Tom
Is your understanding the VAT treatment can be different between M1 & N1
M1 absolutely zero VAT reclaim unless it"s a pool car or you are a professional driving company etc
N1 you can pro-rata the VAT reclaim depending on how you structure the procurement, and you split between: business use/non-business use

That’s not my understanding, they are both the same, only speed limit and road tax differ. If you know otherwise please let me know and I’ll get my accountant to look into it.
i also discovered that i can only get 6%pa in capital allowances..

the truth is I’d be much better off buying a high spec hilux….

 

[chriscroft]

That’s not my understanding, they are both the same, only speed limit and road tax differ. If you know otherwise please let me know and I’ll get my accountant to look into it.
i also discovered that i can only get 6%pa in capital allowances..

the truth is I’d be much better off buying a high spec hilux….

Tom was your plans to buy the Grenadier through a Limited company?

 

[Tom D]

Yes still is.

 

[lightning]

l do find this somewhat confusing particularly regarding the two seat Grenadier.

How has Land Rover managed to get compliance with the new Defender Commercial, which is a similar vehicle. ls it because the Land Rover doesn't have useable windows in the load area? ln the 110 the second row door windows and rear windows look like they are still there, but you can't see through them.
Likewise in the 90. The rear windows look the same (as the car version) but you can't see through them.

 

[Tom D]

I think JLR have approached HMRC and got an exemption. Something which I hope IA are doing.

 

[lightning]

Can you buy a Grenadier Commercial through a limited company?
l am not VAT registered so that part of it isn't an issue, but l can buy my Defender through my limited company and save a large amount of tax (so long as l keep the vehicle and don't change it every three years)

lf l am going to change my Defender for a Grenadier the only way the figures will work is for me to be able to do this, otherwise l am basically buying a £60,000 van where l can get my Defender Commercial for £20,000 less (after the tax is reclaimed)

Will the two seat Grenadier still be classed as a car for BIK purposes again this is a deal breaker for me because it's around £3,000pa

 

[Tom D]

You can buy any vehicle through a LTD company but the amount of tax you can write off in year 1 is different.
With a commercial you can write off the whole lot. With a car its a fixed percentage each year. 9%? Could be wrong on the figure.

 

[Tom D]

Any interest you pay on the finance is deductible too.