MDK45
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Leased Cars

Leased Cars

HI,

Our company arranges the car lease purchases for self employed salesmen who charge the main company for their services. Reasons are historic and also bulk discounts apply which then get transferred. So the Company is currently recovering 50% of the VAT and charging 100% on the invoicing that I can see so far but I am thinking this is incorrect as the Company is not the end recipient of the car (and hence not using the car for partly private reasons) and the end user, who is using the car is claiming 100% VAT relief. Surely this is a disbursement?

Any views and clarity appreciated.

Matthew

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28th Feb 2016 16:16

Leased cars

I think the company can claim all the input tax as his business is also car leasing.

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By MDK45
29th Feb 2016 13:41

Sorry I should clarify. The business is not in the business of car leasing in any capacity. We just have a central HR bit that organises the car leases, gets small discounts. I just am unsure as to whether the accounting for VAT is correct from the purchase invoice through to the invoicing the salesmen for the lease costs of their cars.

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By Ruddles
29th Feb 2016 14:01

So

How would you describe the supply of the cars to the salesmen, if not on hire/lease?

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By MDK45
29th Feb 2016 16:25

We're just arranging the leasing for them so they have cars, the car leasing companies invoice us and then we invoice the salesmen. You could argue that they could arrange their own car lease etc but they probably wouldn't get the discount. We're just effectively passing on the costs as a middleman and being nice to them from an admin point of view.

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By Ruddles
29th Feb 2016 16:51

Doesn't answer my question

How do you describe the temporary supply of assets to someone else? Come on, it's not a difficult question.

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By MDK45
01st Mar 2016 12:42

How would you describe the supply of the cars to the salesmen, if not on hire/lease?

There's no legal agreement paperwork between the company and the salesmen. The only paperwork is the monthly invoices to recover the costs so not sure how you'd describe the supply? Am I missing something here?

 

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By Ruddles
01st Mar 2016 12:51

Why do you need legal paperwork?

(Other than it being advisable). In common language, how would you describe the lease or hire of an asset to someone that is leasing or hiring it from you?

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By MDK45
01st Mar 2016 18:30

Pass! Please I just need some VAT clarification from someone for a set up that is not so complicated unless I haven't explained it so well.

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By Ruddles
01st Mar 2016 19:11

What is so difficult?

The company is providing vehicles to non-employees in return for a payment. If that is not lease/hire of a car, what is it?

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01st Mar 2016 19:14

Maybe

Ruddles wrote:

The company is providing vehicles to non-employees in return for a payment. If that is not lease/hire of a car, what is it?

 

The OP is worried that these self employed salesmen could be deemed as employees and there might be future BIK issues if the employment status is challenged. 

 

On the information supplied, I agree with the knowledgeable Ruddles, it's leasing. 

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By MDK45
02nd Mar 2016 13:30

I had not thought about the separate issue so I'll park that for now! So if my company is deemed to be leasing to these 'non' employed salesmen. Then we should be recovering 50% VAT on input tax and charging 100% output tax and then the salemen can claim only 50% of their input tax (if VAT registered) so then it's not a disbursement i.e. just passing on the gross amount, correct? In absence of a leasing document, it's still a lease then, substance over form prevails?

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02nd Mar 2016 13:33

I have a can opener if you need one.

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By Ruddles
02nd Mar 2016 13:36

I would claim 100% of the VAT

As far as your company is concerned, there is no private use of the vehicle - it is being used wholly for business purposes, being the letting on hire. Yes, should also charge 100% VAT on the hire charges - it is for the salesman to consider whether or not he ought to restrict his input VAT claim.

Going back to the original question, stop getting so hung up on paperwork. A company is providing cars to your company in return for payment - you seem to be quite comfortable that this is leasing. Your company is providing (the same) cars in return for payment - why should the treatment be any different?

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By JimFerd
02nd Mar 2016 14:58

If the contract is with you and the lease company, and then you then choose to lease the vehicles to various other people (albeit with no formal lease agreement) - then I'd agree with the others in that you're definitely in the leasing business and should recover 100% of your inputs.

You might have a potential problem if the head lease doesn't allow sub-leasing though and an insurance claim or similar needs to be made.

If the salesmen in the future are deemed to be your employees, at least their BIK will be reduced if they have reimbursed you for the costs!

 

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