Managing Director purchases old Renault 18 and pays third party to convert this to a 'Lamborghini'. Reclaims, in full, the input VAT through the company. Conversion costs of the order of £25K+.
On completion, MD usues the vehicle for minimal business use but insists on claiming relief on all running expenses.
In addition to VAT Fuel Scale Charges and IT Benefit implications, we believe that there is, potentially, a recovery of VAT on the vehicle when complete by reference to the market value of the converted vehicle on completion.
Robert Clubb & Co.
Has anyone any previous experience of similar cases?
Does Schedule 5 apply to these circumstances?
Robert Clubb & Co.
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Renault Conversions
Somewhat off the original topic, the only credible Lamborghini "replica" kit car does indeed use the transaxle from a Renault 30 to transfer power to the rear wheels from a Rover V8 engine...
Self supply
This would appear to be a clear case of self supply. On completeion of the conversion, the business is deemed to supply the vehicle to itself. Thus output tax is deemed to be charged at the relevant rate and recovery of the input tax dicated by the business use of the vehicle. Thus in this case the company has to cough up 17.5% of the costs to completion.
Even if you wanted to argue that the kit was simply accessories added to the original Renault, there must be a clear business use for the VAT to be recoverable.
As an aside, I bet this is a lovely car. A plastic lambo with an asthmatic Renault underneath. I hope they used an engine from a Renault 30 to give it some credibility!