Our company has got IT equipment under rental agreement (36 months, after the end of the agreement the equipment will become our company property)) at £12k +VAT £2.4k and interest £2640 + VAT £528.
We have put the equipment on Fixed Assets register and depreciating it.
We pay monthly instalments at £406.67+ VAT£81.33.
Can I take the whole amount of VAT £2,298 in the account when prepare the company quarterly VAT Return? Or do I have to spread it over 36 month?
Many thanks
Replies (11)
Please login or register to join the discussion.
You would account for the VAT each month as opposed to front loading it all in advance. Unless of course that was the terms of the arrangement.
You should have been given a VAT schedule setting out the monthly payments and related VAT, that acts as your VAT invoice for reclaim purposes.
That doesn't make sense - you are either leasing the equipment or are you buying it. If the agreement has an option to purchase then it sounds very much like HP.
It could be a finance lease which would be capitalised, but the VAT payments are made (and reclaimed) on the instalment dates, not up front since the asset is still owned by the lessor in the VAT man's eyes (unlike HP).
But a finance lease agreement would not (or at least, should not) provide for the asset to be transferred to the lessee.
Maybe not directly, but there are other ways around this. It also seems to me that often the secondary rental period is dressed up as actual ownership when the agreement is being sold.
Possibly - we could chat all day about all of the possiblities. It would be nice if, for a change, the OP having been given the benefit of free advice were to provide some pertinent facts so that an informed response could actually be given.
Of course if it is HP (as Ruddles says) then you should have an HP agreement that will include all the VAT on the initial 'invoice' from whence you can claim it.
Though not an expert in HP, finance leases etc, I would have thought that you claim whatever it says on the VAT invoices that you (should) have been supplied with and it is down to the supplier to apply the appropriate allocations. That way HMRC get the same amounts returned by both sides of the agreement.
(much as jcace suggests).